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THE  ECONOMIC  BASIS 


OF 


PROTECTION. 


BY 


SIMON   Nf  PATTEN,  Ph.D., 

PROFESSOR   OF   POLITICAL   ECONOMY,   WHARTON    SCHOOL   OF   FINANCE   AND    ECONOMY, 
UNIVERSITY    OF    PENNSYLVANIA. 


PHILADELPHIA! 

J.   B.    LIPPINCOTT    COMPANY. 

1890. 


Copyright,  1890,  by  J.  B.  Lippincott  Company. 


CONTENTS. 


CHAPTER  PAGE 

I. — Introduction 5 

II. — The  Premises  of  the  Present  Discussion 10 

III. — The  Growth  of  Economic  Doctrine 17 

IV. — Fallacies  disproved  by  Time 27 

V. — Natural  Monopolies  fostered  by  Free-Trade  ...  45 

VI. — What   fixes  the  Kate  of  Wages 54 

VII.— The  Cost  of  Labor  '. 64 

VIII.— The  Cost  of  a  Passive  Policy 71 

IX. — Where  Foreign  Commerce  is  a  National  Loss  .    .  81 

X. — Obstacles  to  Economic  Progress 94 

XL— The  Future  of  Raw  Material    : 106 

XII.— The  Consumption  of  Wealth 114 

XIIL— The  Criterion  of  Efficient  Production 126 

XIV. — Shall  the  Ideal  of  American  Civilization  be  Na- 
tional or  Cosmopolitan? 136 


THE    ECONOMIC 

BASIS  OF   PROTECTION 


CHAPTER    I. 

INTRODUCTION. 


The  discussion  of  international  trade  has  always  ex- 
cited much  interest,  and  must,  for  a  long  time,  still 
command  the  attention  of  all  thoughtful  citizens.  A 
great  variety  of  arguments  have  been  presented  to  the 
public  and  many  of  them  are  already  fully  discussed. 
Yet  there  seems  to  be  a  place  and  an  opportunity  at  the 
present  time  for  a  new  discussion  of  this  important 
problem  upon  a  more  fundamental  basis  than  is  usually 
found  in  former  treatises. 

We  do  not  now  need  new  facts  so  much  as  a  discus- 
sion of  the  relation  of  these  facts  to  one  another,  and 
the  bearing  of  all  this  class  of  facts  upon  economic 
doctrine.  Above  all,  we  need  a  discussion  on  a  purely 
economic  basis.  In  the  past  very  few  of  the  writers 
upon  this  subject  have  carefully  separated  the  economic 
arguments  against  protection  from  the  moral  and  politi- 
cal, and  in  this  way  the  former  is  subordinated  to  the 
latter.     Many  writers  start  also  from  the  assumption 

l*  5 


Q  THE  ECONOMIC  BASIS  OF  PROTECTION. 

that  the  most  fundamental  right  of  property  is  that  of 
free  exchange.  They  thus  introduce  premises  which 
are  appropriate  to  other  fields  of  thought.  Deductions 
from  political  dogmas  are  often  substituted  for  a  real 
economic  discussion,  and  in  this  way  clear  thinking  is 
subordinated  to  inherited  feelings.  Others  assume  a 
moral  tone,  and  assert  as  a  fundamental  doctrine  that 
protection  in  any  form  is  a  robbery, — that  it  takes  from 
one  individual  what  it  gives  to  another  and  thus 
violates  the  rights  of  all.  Such  arguments,  how- 
ever great  a  force  they  may  have  upon  persons  of  a 
particular  political  and  moral  education,  are  really  not 
economic  in  their  nature,  and  should  be  separated  from 
strictly  economic  discussions  so  that  the  real  bearing  of 
industrial  facts  may  become  manifest. 

My  purpose  is  also  to  show  the  growth  of  economic 
thought  in  its  relation  to  the  doctrine  of  protection. 
There  has  been  a  gradual  change  in  the  fundamental 
principles  of  political  economy  since  Adam  Smith  first 
brought  the  doctrine  of  free-trade  into  prominence. 
Many  of  the  doctrines  of  Adam  Smith,  upon  which 
his  theory  of  free-trade  rests,  have  been  displaced  by 
other  doctrines  more  in  harmony  with  the  present  con- 
ception of  the  doctrine  of  protection.  Free-trade  by 
sinking  into  a  creed  has  lost  its  scientific  basis. 

The  older  doctrines  of  protection  were  short-sighted, 
in  that  they  sought  for  protection  merely  for  specific 
ends.  Some  writers  having  in  mind  the  growth  of 
population  advocate  protection  that  the  nation  of  which 
they  form  a  part  may  grow  more  rapidly  in  population, 
thinking  that  with  the  growth  of  population  will  come 


THE  ECONOMIC  BASIS  OF  PROTECTION.  7 

that  growth  in  material  resources  upon  which  national 
prosperity  depends.  Others  again  have  emphasized 
national  independence,  and  have  sought  to  show  how 
necessary  it  was  for  national  welfare  to  be  independent 
of  foreign  nations  in  all  important  departments  of 
production.  This  point  of  view  was  especially  impor- 
tant at  an  earlier  time,  when  the  danger  of  war  with 
foreign  nations  was  more  prominent  than  at  the  present 
time.  Another  class  of  writers  have  emphasized  what 
may  be  termed  the  "  infant  industry  argument/'  and 
say  that  new  industries  need  the  aid  of  the  government 
to  develop  them  in  order  that  they  can  stand  the  com- 
petition from  foreign  countries.  This  argument  as- 
sumes that  the  nation  to  which  protection  is  applied 
is  less  advanced  in  civilization  than  other  nations  with 
which  it  has  commercial  relations,  and  that  it  is  de- 
sirable on  the  part  of  the  new  country  to  assimilate  the 
conditions  with  foreign  countries. 

These  various  arguments  have  had  great  force  at 
particular  periods  of  a  nation's  development,  yet  they 
are  not  sufficient  in  themselves  to  form  the  ground- 
work of  economic  doctrine.  We  now  need  a  systematic 
presentation  of  all  these  points  of  view,  so  that  the 
thought  which  lies  at  the  basis  of  all  of  them  may  be 
clearly  seen.  The  new  point  of  view  should  include 
all  these  cases,  and  also  be  able  to  show  the  principles 
upon  which  they  rest.  Protection  now  changes  from  a 
temporary  expedient  to  gain  specific  ends  to  a  con 
sistent  endeavor  to  keep  society  dynamic  and  pro 
gressive.  Protection  also  ceases  to  be  an  isolated  ex- 
ception to  the  general  passive  policy  which  it  has  been 


8  THE  ECONOMIC  BASIS  OF  PROTECTION. 

popular  to  advocate,  and  becomes  a  part  of  a  fixed 
national  policy  to  increase  the  value  of  labor  with  the 
increase  of  productive  power,  and  to  aid  in  the  spread 
of  knowledge  and  skill  and  in  the  adjustment  of  a 
people  to  its  environments. 

I  do  not  advocate  protection  in  the  case  of  our  own 
nation,  for  example,  because  we  are  a  backward  coun- 
try needing  a  special  means  to  bring  us  up  to  the  level 
of  more  progressive  nations.  In  this  respect  I  differ 
from  the  older  economists  who  advocated  a  protective 
policy.  They  seem  to  imply  that  it  is  good  for  the 
American  people  to  approximate  European  conditions. 
On  the  other  hand,  I  would  differentiate  as  much  as 
possible  our  industrial  conditions  from  those  of  Europe. 
We  should  not  accept  the  ideal  of  European  civiliza- 
tion as  that  best  fitted  to  American  conditions.  We 
need  most  of  all  a  new  ideal  which  will  conform  to  the 
industrial  phenomena  which  have  become  prominent  in 
America.  It  is  especially  important  that  we  should 
keep  in  mind  that  an  ideal  growing  out  of  present 
American  conditions  must  harmonize  with  the  dynamic 
state  of  American  society.  In  this  respect  our  ideal 
must  stand  in  sharp  contrast  with  the  static  ideal 
advocated  by  most  free-traders.  The  older  theories  of 
economics  have  always  pushed  to  the  front  the  concep- 
tion of  a  static  society  in  which  all  the  various  elements 
would  harmonize,  and  thus  form  the  highest  state  of 
civilization.  The  ideal  that  I  wish  to  emphasize,  on  the 
contrary,  is  based  on  the  changing  dynamic  conditions 
which  are  necessary  for  any  people  to  pass  through  in 
its  progress  towards  the  highest  possible  social  state. 


THE  ECONOMIC  BASIS  OF  PROTECTION.  9 

A  dynamic  theory  of  social  progress  is  quite  distinct 
from  a  static  theory  of  a  passive  industrial  state.  I 
shall  sharply  oppose  the  ideal  of  the  one  theory  to  that 
of  the  other,  and  in  this  way  make  prominent  those 
conditions  which  force  nations  to  become  more  pro- 
gressive, and  to  overcome  the  obstacles  which  tend  to 
bring  them  prematurely  into  a  static  state. 

Contrary  as  it  may  seem  to  popular  opinion,  the 
theory  of  a  subject  must  always  be  developed  previous 
to  any  intelligent  study  of  the  facts.  The  truth  of  this 
point  of  view  has  been  verified  by  past  experience, 
and  will  find  additional  proof  in  the  future.  Just  as 
the  cosmopolitan  theory,  advocated  by  Adam  Smith, 
upon  which  free-trade  is  based,  was  a  theory  for  a  long 
time  before  it  was  carried  into  practice  by  the  English 
people;  so  at  the  present  time  believers  in  protection 
need  first  of  all  a  consistent  theory  of  the  causes  of 
national  progress,  so  that  all  the  facts  with  which  we 
are  familiar  may  be  brought  in  harmony  with  this 
theory  and  thus  form  its  verification  in  experience.  A 
leading  purpose,  therefore,  in  this  essay,  will  be  to 
present  an  ideal  of  a  society  in  a  dynamic  condition  as 
counterpart  to  the  ideal  of  a  static  state.  I  shall  feel 
satisfied  if  I  succeed  in  showing  that  such  an  ideal 
corresponds  to  the  leading  features  of  American  in- 
dustrial conditions  and  is  in  complete  harmony  with 
the  best  development  of  our  industrial  resources. 
Whether  we  shall  have  a  static  or  dynamic  society  is 
really  the  centre  of  the  discussion  about  the  tariff.  All 
other  issues  are  secondary  to  this,  and  can  be  decided 
only  when  the  main  issue  is  out  of  the  way. 


CHAPTER    II. 

THE  PREMISES   OF  THE   PRESENT  DISCUSSION. 

It  will  be  seen,  from  what  has  already  been  said,  that 
I  am  not  a  believer  in  the  theory  that  there  is  but  one 
system  of  political  economy,  the  doctrines  of  which 
hold  true  for  every  civilization.  Each  nation  in  its 
own  industrial  conditions  has  perhaps  all  the  economic 
causes  at  work  which  influence  any  other  civilization, 
yet  the  relative  importance  of  each  of  these  causes  varies 
with  the  industrial  condition  of  each  people.  Not  only 
is  this  true,  but  the  prominent  causes  operating  in  any 
nation  at  one  time  are  not  likely  to  be  the  same  as  the 
prominent  causes  which  have  operated  in  that  nation 
at  a  much  earlier  period  or  will  operate  in  the  same 
nation  in  the  distant  future.  For  this  reason,  if  we 
wish  to  have  the  economic  policy  of  any  nation  corre- 
spond to  the  actual  social  conditions  which  are  promi- 
nent in  that  nation,  it  is  not  necessary  to  start  with  an 
examination  of  all  those  theoretical  causes  which  might 
influence  the  economy  of  any  nation.  It  will  lead  to 
much  better  results  if  we  confine  ourselves  primarily  to 
those  causes  which  are  prominent  in  the  nation  the 
industrial  conditions  of  which  it  is  our  purpose  to  in- 
vestigate. 

The  basis  of  an  American  political  economy  should 
result  from  an  examination  of  the  present  economic 
10 


THE  ECONOMIC  BASIS  OF  PROTECTION.        \\ 

environment  of  the  American  people.  We  have  promi- 
nent in  our  present  social  conditions'  many  economic 
causes,  which  although  they  may  not  be  new,  yet  they 
never  have  been  the  leading  characteristic  in  the  economy 
of  any  people  before  the  present  time.  The  theory 
which  I  shall  advance  will  make  certain  assumptions  as 
to  the  prominent  facts  in  American  economy,  and  these 
assumptions  I  wish  to  bring  forward  in  an  orderly 
manner,  so  that  the  limitations  of  the  discussion  upon 
which  I  am  about  to  enter  may  be  clearly  seen. 

First,  I  shall  assume  that  the  American  people  are 
in  a  dynamic  state.  There  is  at  the  present  time  a 
constant  growth  of  population,  and  hence  an  increased 
number  of  laborers  must  find  employment  in  some  way. 
We  must  therefore  continually  seek  for  new  oppor- 
tunities for  labor  in  which  this  increase  of  population 
can  find  employment.  I  shall,  in  addition,  assume  that 
the  American  people  are  in  a  more  dynamic  state  than 
that  of  other  competing  nations.  Many  of  the  obstacles 
which  keep  the  people  of  Europe  static  have  little  or 
no  force  in  America  at  the  present  time.  We  are  not 
bound  down  by  the  necessities  of  the  military  rule,  nor 
have  habit  and  custom  that  force  in  keeping  the  people 
in  their  old  lines  of  occupation  that  is  true  of  European 
countries.  As  a  result,  the  American  people  should 
be  more  progressive  than  those  of  Europe.  The  soil 
we  occupy  is  newer  than  that  of  Europe,  the  mines  of 
which  we  make  use  are  superior  to  those  of  foreign 
countries,  and  these  conditions,  coupled  with  the  spirit 
of  activity  which  fills  the  American  people,  should 
push  us  along  into  a  higher  state  of  civilization  much 


12        THE  ECONOMIC  BASIS  OF  PROTECTION. 

more  rapidly  than  it  is  possible  for  the  people  of  older 
civilizations  to  advance. 

Second,  I  shall  assume  that  the  American  people  are 
not  at  the  present  time  adjusted  to  their  economic 
environment.  A  large  part  of  the  inhabitants  of 
America  have  come  from  foreign  countries,  and  even 
those  whose  fathers  or  perhaps  grandfathers  were  born 
upon  American  soil  have  not  yet  lost  those  habits  and 
customs,  those  modes  of  thought,  and  those  articles  of 
diet  to  which  their  ancestors  were  accustomed  while  in 
Europe.  Our  agriculture  must  be  dissimilar  to  that  of 
Europe,  because  our  climate  and  soil  are  different. 
The  crops  that  flourish  in  Germany,  France,  and  Eng- 
land are  not  those  best  adapted  to  American  soil.  Even 
the  clothing  which  European  nations  use  are  not  of 
that  character  which  is  best  suited  to  American  climate. 
The  winters  are  not  as  cold  as  ours  nor  are  their  sum- 
mers as  warm.  As  a  result,  they  can  be  comfortably 
clothed  in  a  way  which  would  be  entirely  unsuited  to 
American  conditions.  In  fact,  Americans  must  adjust 
themselves  to  a  tropical  climate  in  the  summer  and  an 
arctic  climate  in  the  winter,  and  in  the  end  this 
necessity  will  force  them  to  modify  their  clothing  in  a 
way  that  will  make  it  quite  distinct  from  that  of 
Europeans.  Many  other  radically  dissimilar  economic 
conditions  to  which  American  people  must  adjust  them- 
selves might  also  be  pointed  out  which  will  make  the 
typical  American  of  the  future  different  from  the  typical 
European. 

Third,  I  shall  also  assume  that  at  the  present  time 
there  is  a  strong  tendency  in  America  to  increase  the 


THE  ECONOMIC  BASIS  OF  PROTECTION.        13 

share  in  the  distribution  of  wealth  which  goes  to  rent 
and  other  natural  monopolies.  Economic  theory  has 
not  yet  given  due  consideration  to  the  strong  tendencies 
which  are  now  present  in  American  conditions  to 
increase  the  share  of  those  who  are  protected  from 
competition  at  the  expense  of  those  who  must  compete 
with  one  another  upon  equal  footing.  If  American 
conditions  are  such  as  to  bring  forward  this  tendency 
to  a  much  greater  degree  than  has  been  shown  in  any 
previous  civilization,  there  must  be,  on  the  part  of  the 
American  people,  a  corresponding  change  in  American 
economic  policy  so  as  to  adjust  themselves  to  these 
new  conditions. 

This  premise  is  of  especial  importance  in  a  dis- 
cussion of  the  tariff,  because  it  breaks  down  the  chain 
of  reasoning  by  which  the  free-trade  position  is  up- 
held. Where  producers  and  consumers  deal  directly 
with  one  another  cheap  production  results  in  cheap 
commodities.  Increase  the  waste  of  distributing  com- 
modities, or  let  strong  monopolies  grow  up  between 
producers  and  consumers,  and  cheap  production  may  go 
hand  in  hand  with  high  prices  to  consumers.*  Under 
these  conditions  increased  cheapness  on  the  part  of  pro- 
ducers does  not  give  a  proportional  benefit  to  con- 
sumers. It  may  be  wasted  in  useless  competition  or 
pass  into  the  hands  of  the  monopolies  which  free  com- 
merce has  created,  by  separating  the  producer  so  widely 
from  the  consumer. 

My  conclusions,  therefore,  are  not  meant  to  be  gen- 

*See  my  "  Kational  Principles  of  Taxation,"  page  4. 
2 


14        THE  ECONOMIC  BASIS  OF  PROTECTION. 

eral ;  nor  shall  I  emphasize  those  general  economic 
theories  which  are  true  of  all  civilizations.  I  shall 
restrict  myself  at  the  present  time  to  a  society  in 
which  these  premises  to  which  I  have  referred  are  true. 
Any  marked  change  in  these  premises  would  bring  into 
prominence  a  new  series  of  economic  problems  and 
make  invalid  the  conclusions  which  I  draw  from  them. 
If  I  have  correctly  analyzed  the  salient  features 
of  present  American  civilization,  then  the  conclusions 
which  I  shall  draw  are  valid  of  American  conditions. 
It  is,  therefore,  quite  possible  that  the  best  economic 
policy  for  America  may  be  very  different  from  that  of 
other  nations.  In  fact,  this  is  what  I  should  expect. 
I  do  not  desire  to  have  the  conclusions  which  I  shall 
present  judged  by  foreign  conditions,  because  our 
economic  conditions  are  so  different  from  those  of  any 
foreign  nation  that  an  American  industrial  policy  must 
be  of  a  distinct  type  from  that  of  other  nations.  To 
show,  therefore,  that  free-trade  has  been  successful  in 
England  does  not  prove  that  it  would  be  beneficial  to 
us.  The  success  of  this  experiment  in  England  was 
due  to  particular  causes  which  cannot  have  much  foroe 
in  America  at  the  present  time.  Previous  to  that  time 
there  had  been  no  free-trade  nation,  and  all  civil- 
ized countries  needed  a  world's  market.  We  all  gain 
by  having  the  various  national  economies  brought  into 
contact  along  many  lines.  This  was  impossible  so  long 
as  every  nation  followed  a  restrictive  policy.  England 
was  the  first  nation  to  open  up  a  world's  market,  and, 
as  a  result,  not  only  all  England  became  more  prosper- 
ous, but  all  other  nations  acquired  an  advantage  from 


THE  ECONOMIC  BASIS  OF  PROTECTION.        15 

the  free  markets  of  England.  The  world  now  has 
such  a  market.  A  second  market  of  the  same  kind 
would  not  have  that  effect  on  the  development  of  in- 
dustry that  followed  the  opening  up  of  the  English 
markets.  One  nation  may  make  a  great  gain  by  put- 
ting itself  in  contact  with  other  civilizations  and  be- 
coming a  market  for  their  surplus ;  but  a  second  nation 
would  find  the  field  occupied.  At  most,  we  can  hope  to 
divide  this  trade  with  England,  or  po-sibly  to  undersell 
England  in  such  a  manner  as  to  absorb  this  whole  trade 
to  ourselves.  The  mere  displacement  of  England  by 
America,  while  it  might  be  of  some  advantage  to  par- 
ticular classes  in  America,  would  not  be  a  gain  for  the 
whole  world.  The  world's  progress  is  now  dependent 
upon  the  development  of  internal  resources,  and  not 
of  external  trade.  We  need  a  systematic  development 
of  all  those  opportunities  for  labor  with  which  each 
country  has  been  endowed  by  nature.  We  must  make 
a  better  use  of  all  our  natural  resources  if  the  world 
is  to  advance  to  a  higher  industrial  state.  Progress 
must  come  from  the  development  of  large  continental 
nations,  rich  in  natural  resources.  Small  nations,  de- 
ficient in  many  of  those  natural  resources  needed  for  a 
nation's  development,  must  rely  largely  upon  trade  to 
obtain  those  things  in  which  their  resources  are  defi- 
cient. To  such  a  nation  the  profits  of  trade  can  to  a 
large  degree  be  accepted  as  the  criterion  of  national 
prosperity;  but  large  continental  nations  must  look 
nearer  the  real  source  of  national  prosperity  to  obtain 
their  criterions.  They  must  become  successful  by  the 
development  of  their  natural   resources.      Their  land 


16        THE  ECONOMIC  BASIS  OF  PROTECTION. 

and  their  mines  must  be  opened  up  and  the  productive 
capacity  of  each  laborer  must  be  increased.  Only  after 
all  the  possibilities  of  land  have  been  carefully  in- 
vestigated and  the  industrial  qualities  of  the  people 
carefully  examined,  can  they  discover  what  national 
policy  will  bring  to  them  the  greatest  industrial  pros- 
perity. 


CHAPTER    III. 

THE    GROWTH    OF    ECONOMIC   DOCTRINE. 

So  little  attention  has  been  paid  to  the  history  and 
gradual  development  of  economic  theory  that  the  pub- 
lic have  very  misty  ideas  as  to  the  relation  of  free- 
trade  to  economic  doctrine.  The  development  of  the 
doctrine  of  free-trade  is  largely  due  to  Adam  Smith,  or 
at  least  we  may  say  that  he  was  the  first  one  to  present 
it  in  a  systematic  way  to  the  thinking  world.  Since 
the  groundwork  of  the  creed  of  free-trade  is  to  be 
found  in  his  writings  and  those  of  his  disciples,  I  de- 
sire to  examine  into  the  premises  from  which  they 
start,  so  as  to  show  in  what  ways  these  doctrines  have 
been  undermined  by  later  economic  progress. 

The  criterion  of  prosperity  which  Adam  Smith  uses 
is  that  of  profit  of  the  individual.  If  an  exchange  is 
profitable  to  the  parties  directly  interested,  he  assumes 
that  it  is  beneficial  to  the  nation.  In  this  way  the  in- 
dividual profit  of  producers  becomes  a  criterion  of  na- 
tional prosperity.  Under  the  new  conditions  of  pro- 
duction which  have  arisen  since  the  time  of  Adam 
Smith,  a  sale  profitable  to  the  producer  does  not  indi- 
cate that  it  has  been  also  advantageous  to  the  public  in 
the  way  that  a  like  sale  for  a  corporation  would  indi- 
cate the  advantage  of  all  the  stockholders.  We  have 
no  means  by  which  the  advantage  derived  in  an  ex- 
b  2*  17 


18        THE  ECONOMIC  BASIS  OF  PROTECTION. 

change  can  be  divided  among  the  various  groups  of 
producers  in  the  way  a  stock  company  divides  the  pro- 
ceeds of  its  sales.  In  fact,  it  can  often  happen  that  the 
advantage  of  one  party  in  an  industrial  operation  may 
result  in  a  disadvantage  to  the  other  interested  parties. 
Adam  Smith,  in  his  investigations  of  the  productive 
power  of  nations,  also  confines  himself  too  exclusively 
to  the  division  of  labor,  and  continually  emphasizes  the 
importance  of  this  feature  of  modern  production.  He 
regards  the  division  of  labor  as  the  cause  of  national 
prosperity.  Subsequent  investigations  show  the  disad- 
vantages of  the  division  of  labor,  and  that  the  increase 
of  productive  power  is  often  antagonistic  to  the  use  of 
men  and  of  land  for  one  thing  only  in  the  May  which 
Adam  Smith  advocates. 

Passing  from  the  position  of  Adam  Smith  to  that 
of  Ricardo,  we  have  a  great  advance  in  economic  doc- 
trine. Ricardo  also  was  an  advocate  of  free-trade,  and 
some  of  his  arguments  are  particularly  emphasized  in 
free-trade  discussions.  It  is,  however,  unfortunate  for 
the  validity  of  these  arguments  that  they  are  based  on 
that  part  of  the  doctrine  of  Ricardo  which  has  since 
been  discarded  by  modern  economists.  The  economic 
man  of  Ricardo  harmonizes  nicely  with  the  free-trade 
conception  of  men.  If  man  were  as  simple  in  his 
mechanism  as  Ricardo  supposes,  and  had  but  one  in- 
dustrial quality  developed,  the  social  conditions  which 
would  result  would  harmonize  fully  with  free-trade 
doctrines.  In  the  same  way  Ricardo's  conception  of 
land  brought  out  that  use  of  land  which  free-traders 
emphasized.     If  all  the  land  of  the  world  were  merely 


THE  ECONOMIC  BASIS  OF  PROTECTION.        19 

wheat  land,  then  we  should   have  an  economic  basis 
upon  which  free-trade  might  rest.     We  now  know  that 
the  economic  man  of  Ricardo  was  merely  an  ideal  and 
not  the  actual  man  which  we  find  in  society,  or  even  in 
any   possible  society   with  a  high  civilization.     Men 
have  numerous  industrial  qualities,  all  of  which  must 
be  developed  if  they  are  to  make  the  most  of  their 
economic  environment.     We  know  also  that  Ricardo's 
conception  of  land  was   as  faulty,  or  perhaps  I  should 
say  as  ideal,  as  that  of  his  economic  man.     There  is  no 
land  from  which  society  can  acquire  any  considerable 
advantage  as  long  as  it  is  used  for  any  one  purpose. 
The  cultivation  of  wheat  or  any  other  single  crop  soon 
deteriorates  the  qualities  of  the  soil.     Land  does  not 
have  any  indestructible  qualities  which  will  allow  its 
use  in  any  one  way  without  serious  economic  disadvan- 
tage.    For  these  reasons  that  conception  of  men  and 
land,  of  which  Ricardo  makes  so  much  use,  cannot  be 
accepted  as  the  basis  of  a  progressive  national  economy. 
So  far  as  free-trade  has  such  a  conception  as  its  basis,  it 
is  not  a  policy  which  will  lead  to  the  greatest  increase 
of  the  productive  power  of  any  nation  ;  and  the  reliance 
which  free-traders  still  have  on  this  point  of  view  has 
put  them  out  of  harmony  with  the   later  growth   of 
economic  doctrine. 

While  free-traders  have  accepted  and  relied  upon 
that  part  of  the  doctrines  of  Ricardo,  which  have  been 
proved  false  by  later  investigations,  they  have  neg- 
lected to  show  the  relation  of  the  doctrine  of  free- 
trade  to  those  parts  of  the  economy  of  Ricardo  which 
have  been  proved  to  be  true.     The  leading  doctrine  of 


20        THE   ECONOMIC  BASIS  OF  PROTECTION. 

Ricardo  is  that  of  rent,  and  the  study  of  rent  has 
brought  into  prominence  natural  monopolies  that  in- 
terfere with  the  natural  distribution  of  wealth.  It 
has  never  been  shown  that  the  doctrine  of  free-trade 
leads  to  good  results  so  long  as  a  large  share  of  the 
wealth  produced  is  acquired  by  the  owners  of  natural 
monopolies.  The  doctrine  assumes  that  prices  of  all 
commodities  stand  in  direct  relation  to  the  quantity  of 
labor  needed  to  produce  these  articles.  If  there  were 
no  natural  monopolies  this  might  be  true,  but  as  soon  as 
the  owners  of  natural  resources  secure  as  rent  a  large 
part  of  the  productive  power  of  the  nation,  the  prod- 
ucts of  natural  monopolies  no  longer  exchange  with 
other  commodities  in  proportion,  to  the  quantity  of 
labor  needed  to  produce  them.  When  rent  becomes  an 
important  factor  in  the  distribution  of  wealth,  the  sim- 
ple hypothesis  upon  which  free-trade  rests  is  no  longer 
true.  This  part  of  the  theory  of  Ricardo  is  now  an- 
tagonistic to  the  free-trade  doctrines  based  upon  the 
other  part  of  his  theory  which  has  since  proved  false. 

From  Ricardo's  time  economic  theory  and  the  creed 
of  free-trade  have  no  longer  harmonized.  The  doc- 
trine is  now  championed  by  a  new  class  of  thinkers 
who  cannot  be  regarded  as  strictly  economic.  The  in- 
troduction of  free-trade  in  England  caused  these  writers 
to  emphasize  the  results  of  free-trade  as  the  best  evi- 
dence of  the  correctness  of  that  policy  and  to  neglect 
the  theoretical  proofs  advanced  by  earlier  economists. 
This  change  is  accompanied  by  the  rise  of  the  Man- 
chester party  in  England.  Exchange  is  now  put  for- 
ward as  the  fundamental  fact  of  all  economic  science. 


THE  ECONOMIC  BASIS  OF  PROTECTION.        21 

No  further  analysis  of  economic  phenomena  is  made 
other  than  would  show  the  profit  of  exchange  in 
general.  Many  writers  now  limit  economic  science  to 
an  exposition  of  exchange,  and  in  this  movement 
Bastiat  took  the  lead,  and  soon  he  became  the  promi- 
nent leader  of  the  free-trade  movement.  He  entirely 
neglects  the  influence  of  rent  and  the  effect  of  the 
rapidly-increasing  value  of  all  natural  monopolies.  In 
fact,  he  tries  to  disprove  that  there  is  any  such  thing  as 
rent.  In  this  way  the  popular  free-trade  movement 
came  in  direct  opposition  to  better  economic  thought, 
and  the  lines  of  distinction  between  economic  scholars 
and  the  adherents  of  the  popular  free-trade  creed  are 
very  marked. 

The  later  developments  of  economic  theory  have 
gradually  increased  the  breach  between  free-trade  doc- 
trines and  sound  economics.  The  cost  of  production 
had  been  viewed  by  Ricardo  and  also  by  Mill  from 
the  stand-point  of  the  employer  only.  Cost  of  produc- 
tion was  made  to  consist  of  the  wages  of  laborers  and 
the  profits  of  employers.  So  long  as  the  leading  argu- 
ments of  protective  writers  were  limited  to  a  point 
of  view  that  emphasized  national  prosperity  and  failed 
to  analyze  the  distribution  of  wealth,  this  doctrine  of 
the  cost  of  production  seemed  a  strong  support  to  free- 
trade.  About  1840  the  laborers  became  separated 
into  so  distinct  a  class  that  their  interests  were  no 
longer  in  complete  harmony  with  those  of  their  em- 
ployers. The  distribution  of  wealth  now  became  the 
prominent  problem  of  economic  science,  and  the  rights 
of  laborers  were  sharply  contrasted  with  those  of  their 


22        THE  ECONOMIC  BASIS  OF  PROTECTION. 

employers.  Protection  now  assumes  a  new  form  and 
is  advocated  as  a  means  of  securing  to  the  laborers  a 
larger  share  in  the  distribution  of  wealth.  The  doc- 
trine that  the  cost  of  production  consists  of  the  wages 
of  laborers  and  the  profits  of  employers  gave  a  good 
basis  of  the  economic  argument  now  advanced  by  pro- 
tectionists, and  there  was  no  other  way  that  believers 
in  the  doctrine  of  free-trade  could  meet  the  new  argu- 
ments but  by  abandoning  this  conception  of  the  cost  of 
production.  As  a  result,  the  doctrine  of  free-trade  was 
left  by  Mill  in  as  bad  a  shape  as  he  left  the  doctrine  of 
the  wage  fund  or  of  value.  If  the  old  doctrines  of 
free-trade,  of  value  and  of  wages,  were  to  continue  to 
receive  the  support  of  economists,  a  new  basis  must  be 
found  upon  which  they  could  rest. 

It  was  Cairnes  who  endeavored  to  close  the  breach 
which  time  had  made  in  the  old  economy.  He  took  up 
these  three  doctrines  and  by  a  careful  re-examination 
sought  to  strengthen  them  by  new  arguments.  It  is  now 
conceded  that  he  failed  in  re-establishing  the  wage  fund 
or  in  giving  a  better  basis  to  the  old  doctrine  of  value. 
The  tendency  of  recent  thought  has  been  in  a  contrary 
direction  to  the  doctrines  advanced  by  Cairnes.  In 
considering  value  it  is  now  acknowledged  that  Jevons 
and  not  Cairnes  was  on  the.  right  track  ;  nor  have  the 
views  of  Cairnes  upon  the  wage  fund  been  accepted  by 
as  many  economists  as  to  have  them  considered  good 
economic  doctrine.  The  support  he  gave  free-trade  is 
as  defective  as  that  of  the  other  doctrines  he  endeav- 
ored to  substantiate.  He  discarded  the  doctrine  that  the 
cost  of  production  should  be  regarded  as  made  up  of 


THE  ECONOMIC  BASIS  OF  PROTECTION.        23 

wages  and  profits,  and  sought  to  bring  into  use  a  new 
conception  of  cost  based  upon  a  subjective  rather  than 
an  objective  point  of  view.  Instead  of  the  profits  of 
employers  and  the  wages  of  workmen  we  have  now 
the  sacrifice  of  the  workmen  themselves  put  as  a  basis 
of  the  cost  of  production.  Under  ideal  conditions, 
where  there  are  no  natural  monopolies,  it  is  quite  pos- 
sible that  commodities  may  have  a  value  in  proportion 
to  the  sacrifice  of  those  who  produce  them.  At  the 
present  time,  however,  the  share  of  the  whole  product 
of  industry  which  the  owners  of  natural  monopolies 
secure  is  too  great  to  allow  any  such  theory  to  corre- 
spond to  all  the  facts  about  us.  The  cost  of  labor  has 
an  influence  upon  all  exchanges  now  made,  and  the 
argument  for  protection  which  is  based  upon  this  point 
of  view  cannot  be  disproved  while  present  economic 
conditions  continue. 

The  theories,  however,  which  harmonize  with  the 
doctrine  of  free-trade  have  been  undermined  in  another 
direction  still  more  fundamental  than  those  which  I 
have  mentioned.  The  doctrine  of  free-trade  is  a  part 
of  the  old  economic  system  which  assumes  that  there  is 
a  body  of  economic  doctrines  good  for  every  people  in 
every  age.  The  old  system  was  absolute  because  it  did 
not  allow  any  modifications  due  to  changes  in  indus- 
trial conditions.  It  was  conceived  as  perpetual  because 
it  was  thought  to  conform  to  the  conditions  of  every 
nation  in  all  stages  of  its  progress;  and  it  was  cosmo- 
politan because  it  wished  to  create  a  single  market  into 
which  the  whole  world  would  become  united  before  its 
resources  were  fully  developed. 


24        THE   ECONOMIC  BASIS  OF  PROTECTION. 

The  rise  of  the  historical  economists  displaced  this 
conception  of  political  economy.  We  no  longer  seek 
after  a  universal  economy  which  will  be  good  under  all 
industrial  conditions,  but  for  one  that  is  fitted  to  the 
people  of  a  particular  nation  in  a  particular  stage  of  its 
development.  In  every  modification  of  the  economi- 
cal conditions  of  such  a  nation  we  now  anticipate  that 
new  phenomena  will  come  to  the  front  in  a  way  that 
will  modify  the  economy  of  the  nation.  That  a  policy 
was  good  for  one  nation  at  a  particular  time  is  no  longer 
regarded  as  sufficient  evidence  that  it  will  be  good  for 
other  nations,  or  for  other  times.  The  causes  of  na- 
tional prosperity  must  be  studied  under  the  peculiar 
conditions  of  each  nation,  and  the  separate  problems 
which  its  economy  brings  forward  must  be  solved  by  a 
study  of  its  own  economic  conditions. 

In  this  way  an  economy  such  as  I  have  outlined  in 
the  previous  chapter  is  in  harmony  with  the  mode  of 
thinking  now  prevalent  among  economists.  American 
conditions  must  be  investigated  before  we  can  ascertain 
what  policy  will  be  best  suited  to  the  American  peo- 
ple, and  if  we  find  that  several  leading  characteristics 
in  that  economy  are  different  from  what  we  find  in 
other  nations,  we  have  the  conditions  which  force  us  to 
separate  the  theory  of  American  economy  from  that  of 
other  nations. 

In  still  another  way  has  the  doctrine  of  free-trade 
become  antagonistic  to  economic  thought.  At  the  time 
of  Adam  Smith  political  ideas  were  the  dominant  ones. 
The  prevailing  system  of  thinking  was  based  upon  the 
doctrine  of  natural  liberty.     There  were  no  sharply- 


THE  ECONOMIC  BASIS  OF  PROTECTION.        25 

drawn  lines  which  separated  political  economy  from 
political  science,  and  as  a  result  economic  and  political 
premises  were  so  intermingled  that  many  doctrines 
regarded  as  economic  had  no  economic  basis.  How- 
ever true  it  may  be  that  a  passive  policy  has  the 
support  of  our  inherited  ideas  as  to  political  rights,  it 
cannot  be  accepted  as  economic  doctrine  until  it  has 
been  based  upon  industrial  facts.  Such  a  verification 
of  the  economic  benefits  of  non-intervention  has  not 
been  developed.  We  now  quite  clearly  see  that  modern 
industrial  conditions  force  men  to  modify  their  ideas  of 
natural  liberty  before  they  can  make  the  best  use  of 
their  material  resources. 

In  all  these  ways  economic  science  has  been  separated 
farther  and  farther  from  a  point  of  view  in  harmony 
with  the  creed  of  free-trade,  and  in  the  future,  political 
economy  will  separate  itself  still  farther  from  the  sta- 
tionary position  of  free-traders,  because  it  must  investi- 
gate that  class  of  economic  phenomena  separated  most 
widely  from  that  which  free-traders  emphasize.  The 
theory  of  exchange  has  now  become  a  very  subordinate 
part  of  economic  doctrine.  More  fundamental  problems 
now  occupy  the  attention  of  economists  than  that  of 
market  value  and  the  profit  of  producers.  In  the 
future  economic  investigation  must  be  based  upon  the 
primary  facts  which  cause  commodities  to  have  a  value 
to  their  possessors.  The  doctrine  of  utility  has  been 
so  fully  developed  that  the  new  axioms  concerning 
value  must  displace  the  old  ones  that  are  based  upon 
profit.  In  this  way  the  theory  upon  which  free-traders 
rely  will  be  so  far  removed  .from  economic  science  that 
b  3 


26        THE  ECONOMIC  BASIS  OF  PROTECTION. 

we  must  think  of  the  past  age  as  having  a  distinct 
school  of  economists.  Soon  economic  theory  will  be  as 
far  separated  from  the  creed  of  free-trade  expressed  in 
the  doctrines  of  the  Manchester  school  as  those  doc- 
trines are  from  that  of  the  Mercantile  school  which 
they  displaced. 

Economics  in  the  future  must  deal  mainly  with  the 
dynamic  conditions  in  which  society  now  finds  itself 
placed.  Free-trade  being  a  part  of  the  economy  of  a 
static  state  does  not  apply  to  present  conditions.  The 
system  of  natural  liberty  which  formed  a  basis  of 
economic  doctrine  during  the  last  century  conceived 
society  as  moving  towards  an  ideal  static  state,  and  the 
strength  of  the  free-trade  position  rests  in  the  sharply- 
defined  ideal  which  is  presented  of  such  a  static  state. 
The  dynamic  condition  of  society  at  the  present  time 
requires  a  very  different  ideal  from  that  which 
harmonizes  with  a  static  state.  If  we  wish  the  doc- 
trines of  a  dynamic  state  to  have  that  force  that  the 
doctrines  of  a  static  state  now  have,  a  clear  conception 
must  be  formed  of  the  causes  operating  in  a  dynamic 
state  and  of  the  economy  suited  to  a  dynamic  society. 


CHAPTER     IV. 

FALLACIES   DISPROVED    BY   TIME. 

It  is  a  prevalent  practice  of  free-traders  to  go  over 
all  the  discarded  economic  dogmas  of  the  past,  particu- 
larly those  of  the  Mercantile  school  of  economists,  and 
then  representing  them  as  the  principles  of  modern  pro- 
tectionists. In  this  way  protection  is  brought  into  dis- 
credit and  a  feeling  created  that  the  doctrine  of  free- 
trade  corresponds  more  closely  with  the  present  state 
of  economic  knowledge.  It  is  my  purpose  at  the  present 
time  to  examine  the  arguments  used  by  free-traders  and 
in  this  way  show  how  many  of  their  positions  have  been 
disproved  by  the  outcome  of  subsequent  events.  Many 
of  their  leading  arguments  which  seemed  plausible  and 
harmonized  with  the  economic  theories  of  the  day,  when 
examined  at  a  later  period  by  the  light  of  actual  results, 
show  quite  clearly  the  erroneous  notions  which  were 
held  in  the  past,  and  enable  us  to  see  that  free-trade 
doctrines  are  not  really  based  upon  the  best  economic 
knowledge  of  to-day.  The  creed  of  free-trade  is  as 
much  out  of  harmony  with  present  industrial  facts  as 
the  doctrines  of  the  Mercantile  school  were  with  those 
facta  at  the  time  of  Adam  Smith. 

The  most  frequent  charge  against  protection  is  that 
it  discourages  international  trade.  Tariff  is  often  rep- 
resented as  a  Chinese  wall,  which  shuts  out  each  nation 

27 


28        THE  ECONOMIC  BASIS  OF  PROTECTION 

from  any  trade  with  its  neighbors.  Protectionists  are 
represented  as  wishing  for  a  tariff  operated  in  a  way 
that  would  cut  otf  each  nation  from  the  benefits  of 
commerce.  This  position,  however,  does  not  represent 
the  truth  about  the  protection  doctrine.  Protectionists 
do  not  desire  to  destroy  foreign  trade.  They  wish  to 
develop  foreign  trade  as  much  as  their  opponents  do. 
The  difference  between  the  two  policies  lies  in  the  kind 
of  trade  the  nation  should  encourage  and  in  the  connec- 
tion between  foreign  trade  and  national  prosperity. 
Foreign  trade  is  the  effect,  not  the  cause,  of  national 
prosperity,  and  protection  increases  foreign  trade  by 
increasing  national  prosperity.  The  higher  price  of 
one  class  of  foreign  articles  will  have  the  effect  of 
creating  a  demand  for  another  class  by  building  up 
national  industries  and  promoting  national  prosperity. 
A  people  with  but  few  wants  will  necessarily  satisfy 
most  of  them  by  the  demand  for  home  commodities. 
Every  increase  in  the  variety  of  consumption  creates 
a  demand  for  many  articles  which  would  not  be  desired 
by  people  so  long  as  their  condition  was  less  prosperous 
and  production  confined  to  fewer  articles.  As  the 
people  become  more  prosperous  their  wants  become 
more  varied ;  and,  through  the  greater  variety  in  their 
wants,  they  will  seek  not  only  in  their  own  country  but 
also  in  foreign  countries  for  those  commodities  which 
will  satisfy  their  new  wants.  And,  if  other  nations 
adhere  to  a  sound  national  policy,  their  increased  pros- 
perity will  lead  them  also  to  broaden  their  consumption, 
and  thus  create  a  demand  for  the  commodities  of  the 
first  nation.      Whatever  broadens  consumption,  there- 


THE  ECONOMIC  BASIS  OF  PROTECTION.        29 

fore,  has  as  a  result  an  increase  of  foreign  trade, 
through  which  both  parties  to  the  exchange  add  to 
their  prosperity.  This  increase  in  foreign  trade  will 
not  be  in  those  articles  on  which  the  tariff  has  been 
laid,  but  in  other  articles.  The  eifect  of  the  increased 
prosperity  coming  from  the  tariff  will  cause  each  nation 
to  demand  so  great  a  variety  of  articles  that  many  of 
them  cannot  be  found  at  home.  If,  then,  there  is  a 
direct  connection  between  the  amount  of  foreign  trade 
and  national  prosperity,  protection  will  increase  foreign 
trade,  if  protection  is  that  policy  which  is  best  fitted  to 
develop  national  prosperity. 

A  second  fallacy  of  free-traders  consists  in  assuming 
that  the  best  use  of  land  and  of  men  is  attained  by 
using  them  for  a  single  purpose.  The  illustrations 
upon  which  they  rely  to  prove  their  position  are  taken 
from  commerce  and  manufactures.  It  is  shown  how 
rapidly  the  productive  power  of  men  and  of  machines 
increases  in  our  leading  industries  with  the  division  of 
labor,  through  which  each  man  and  machine  is  used 
for  some  single  purpose.  They  then  assume  that  land 
is  also  put  to  its  best  use  when  employed  in  raising- 
some  one  crop.  They  suppose  that  there  is  some  land 
best  fitted  for  wheat  and  upon  which  a  continuous 
series  of  wheat  crops  can  be  obtained.  Then  other 
land  is  thought  of  as  cotton  land,  and  still  other  land 
a-  coffee  land  or  sugar  land.  In  this  way,  the  whole 
land  of  the  world  is  divided  up  into  sections  supposed 
to  be  devoted  to  some  one  purpose,  just  as  the  machines 
upon  the  market  are  known  to  be  best  used  for  some 
one  end.     This  conception,   however,  is  radically  erro- 

8* 


30        THE  ECONOMIC  BASIS  OF  PROTECTION. 

neous.  There  is  no  piece  of  land  which  can  give  as 
great  a  return  for  one  crop  as  for  a  group  of  crops. 
Devote  a  piece  of  land  to  the  continuous  production  of 
wheat  and  you  take  from  the  land  a  large  share  of  its 
fertility.  There  will,  after  the  first  few  years,  be  a 
steady  diminution  of  the  product,  until  at  last  the  land 
will  be  exhausted  and  perhaps  abandoned.  In  the 
same  way  the  continuous  production  of  tobacco  upon 
land  completely  exhausts  it,  until  finally  it  must  be 
left  to  nature  and  becomes  entirely  worthless.  We 
have  in  many  parts  of  the  South  instances  of  this 
ruinous  use  of  the  soil  for  tobacco.  The  South  affords 
another  good  illustration  of  this  wasteful  policy  in  the 
use  of  land  for  cotton,  the  same  general  law  being  at 
work  through  which  a  continuous  use  of  land  for  one 
purpose  ends  in  destroying  its  fertility. 

If  we  are  to  make  the  best  use  of  land  we  must  look 
upon  it  not  as  we  do  upon  a  machine,  but  in  the  light 
of  an  agent  whose  best  use  requires  a  great  variety  of 
crops.  I  do  not  mean  by  this  that  each  kind  of  soil  is 
fitted  for  any  crop,  and  that  every  crop  must  form  a 
part  in  the  rotation  which  its  best  use  demands.  There 
is,  however,  a  group  of  products  which  is  best  fitted  for 
each  given  piece  of  land.  In  Minnesota  we  need  one 
series  to  produce  the  best  results,  in  Louisiana  another, 
in  Florida  still  others.  Now  if  this  law  be  true,  and 
land  is  better  fitted  for  many  uses  than  for  one,  it  is 
erroneous  to  reason  about  it  as  if  it  were  a  machine. 
If  on  any  given  piece  of  land  it  requires,  say,  five  crops 
for  its  best  use,  the  price  of  produce  may  be  such  as 
will  pay  the  producer  to  bring  only  one  of  them  to 


THE  ECONOMIC  BASIS  OF  PROTECTION.        31 

market,  or  at  least  that  one  of  the  five  is  much  more 
profitable  than  all  the  others.  In  this  way,  if  free- 
trade  is  allowed,  the  land  will  be  used  for  one  pur- 
pose until  exhausted,  or  there  will  be  at  least  a  strong 
tendency  on  the  part  of  producers  to  obtain  this  one 
crop  more  often  than  is  good  for  the  soil. 

The  policy  of  a  government  desiring  to  develop  its 
land  most  fully  must  necessarily  be  one  that  will  create 
in  the  vicinity  of  each  class  of  lands  a  demand  for  all 
that  group  of  products  which  is  necessary  for  its  best 
use.  Until  this  is  brought  about  there  is  no  hope  that 
the  agriculture  of  the  nation  will  be  as  progressive  as 
it  should  be.  The  law  of  agricultural  industry  is, 
therefore,  the  opposite  of  manufacturing  industry. 
The  best  use  of  land  demands  a  variety  of  products, 
while  a  factory  is  more  productive  making  one.  Free- 
traders in  regarding  land  as  a  machine,  therefore,  make 
a  great  mistake,  and  by  following  their  reasoning  a 
nation  falls  into  serious  errors. 

Since,  however,  a  variety  of  uses  of  the  land  does 
not  mean  to  produce  upon  each  piece  of  land  every 
article,  there  are  still  the  conditions  necessary  to  create 
a  large  and  prosperous  trade  between  different  parts  of 
the  world  as  soon  as  the  variety  in  their  diet  becomes  so 
great  as  to  exceed  those  articles  which  are  necessary 
for  the  best  use  of  their  own  land.  When  the  simple 
tastes  of  primitive  people  are  enlarged  there  will  be 
a  continual  increase  in  trade  between  different  na- 
tions, even  in  agricultural  commodities,  and  this  trade 
will  grow  with  the  prosperity  of  each  part  until  at 
length  it  will  be  much  greater  than  it  could  possibly 


32        THE  ECONOMIC  BASIS  OF  PROTECTION. 

be  if  an  erroneous  conception  of  the  productive  power 
of  land  should  cause  men  to  use  it  for  one  thing  instead 
of,  as  it  should  be,  for  a  great  variety  of  purposes. 

Another  of  the  old  standard  arguments  for  free- 
trade  now  demands  attention.  The  argument  as  usu- 
ally presented  by  free-traders  assumes  that  America 
has  a  special  fitness  for  the  production  of  wheat.  All 
over  the  West,  it  is  said,  wheat  is  the  crop  best  suited 
for  the  soil.  On  the  contrary,  England  has  its  special 
advantage  in  the  production  of  iron.  Coal  and  iron 
have  been  placed  by  nature  in  close  proximity  in  Eng- 
land, and  as  a  result  the  cost  of  iron  is  much  lower 
than  elsewhere.  As  America  has  special  advantages 
in  the  production  of  wheat  and  England  in  the  pro- 
duction of  iron,  it  will  be  profitable  for  both  nations  if 
America  produces  the  wheat  and  England  devotes 
itself  to  the  production  of  iron.  Is  it  true,  however, 
that  America  is  particularly  fitted  for  the  production 
of  wheat,  and  that  the  ability  of  England  to  produce 
iron  is  greater  than  that  of  America  ?  If  this  claim  be 
examined  from  our  present  knowledge  of  the  produc- 
tive capacity  of  England  and  America,  the  answer 
must  be,  not  that  America  is  best  fitted  for  wheat  and 
England  for  the  production  of  iron,  but  that  England 
is  especially  adapted  to  the  production  of  wheat  while 
America  has  the  better  facilities  for  the  production  of 
iron.  At  first  this  may  seem  a  remarkable  statement, 
and  the  question  naturally  arises,  if  America  is  less 
fitted  for  the  production  of  wheat  and  England  for  the 
production  of  iron,  why  has  not  the  trade  of  this  coun- 
trv  gone  in  a  contrary  direction,  so  that  America  would 


THE  ECONOMIC  BASIS  OF  PROTECTION.        33 

produce  the  iron  and  England  the  wheat  ?  Such  a  re- 
sult would  follow  if  the  free-trade  theory  were  correct, 
and  hence  we  have  a  good  test  of  the  theory.  Let  us, 
then,  cast  aside  the  theory  for  a  moment  and  examine 
the  real  facts  of  American  and  English  production  ;  be- 
cause these  facts  will  show  that  each  of  these  countries 
under  free-trade  has  a  strong  tendency  to  produce  that 
for  which  it  is  least  fitted.  England  has  a  marked 
advantage  over  America  in  the  production  of  wheat, 
due  to  the  peculiar  conditions  of  English  climate. 
Wheat  is  a  cereal  with  short  roots,  not  sinking  deeply 
into  the  ground.  Such  crops  thrive  best  where  the 
soil  is  very  damp  and  moist,  and  where  a  large 
quantity  of  rain  falls  at  regular  intervals  during  the 
period  when  the  wheat  is  growing.  American  condi- 
tions are  the  reverse  of  those  of  England.  We  have 
dry,  hot  summers,  often  with  long  intervals  between  the 
rains,  and  as  a  result  the  surface  of  the  ground  becomes 
so  hard  that  a  crop  like  wheat,  which  does  not  root 
deeply,  is  at  a  serious  disadvantage.  This  advantage 
of  England  for  wheat  is  further  proved  by  the  statistics 
showing  the  production  of  wheat  per  acre  in  England 
and  America.  American  soils  usually  do  not  yield  more 
than  twelve  bushels  an  acre,  and  many  years  this 
amount  is  not  obtained  because  of  the  severity  of  our 
climate  and  the  abundance  of  insect  life ;  vet  under  Eng- 
lish conditions  twenty-six  bushels  an  acre  is  not  regarded 
a  large  crop,  showing  that  under  similar  conditions  an 
English  acre  will  produce  at  least  half  as  much  again 
as  the  quantity  obtained  from  the  average  American  acre 
upon  which  wheat  has  been  grown  for  foreign  markets. 


34        THE  ECONOMIC  BASIS  OF  PROTECTION. 

On  the  other  hand,  if  we  examine  into  the  conditions 
for  the  production  of  iron,  it  will  be  found  that  our 
beds  of  iron  are  purer  than  those  of  England  and  that 
our  coal-beds  are  thicker  than  those  from  which  English 
coal  is  obtained.  As  a  result  of  this  superior  produc- 
tivity of  our  iron  and  coal  mines,  the  same  quantity  of 
labor  in  America  can  give  a  greater  product  than  in 
England.  This  fact  is  now  generally  acknowledged 
even  by  free-traders,  although  until  a  very  late  date  it 
has  been  denied.  Our  knowledge  of  American  condi- 
tions compared  with  those  of  England  is  now  so  accu- 
rate that  it  is  impossible  for  any  one  to  deny  the 
superior  productivity  of  onr  iron  and  coal  mines.  Yet 
in  spite  of  these  facts  trade  between  the  United  States 
and  England  actually  has  a  tendency  to  increase  in 
America  the  demand  for  wheat,  although  wheat  is 
less  fitted  for  American  than,  for  English  soil,  while 
the  same  commercial  conditions  increase  in  England 
the  demand  for  iron,  although  American  mines  are 
superior  to  those  of  England.  In  this  way  it  is  seen 
that  trade  actually  runs  in  an  opposite  direction  to 
what  the  theory  of  free-trade  supposes,  and  thus  the 
falseness  of  the  doctrine  is  clearly  seen. 

Another  argument  often  advanced  by  free-traders 
is  that  protection  impairs  the  moral  independence  of 
the  people  and  causes  them  to  be  less  enterprising  and 
independent  than  otherwise,  and  that  it  creates  in  them 
a  tendency  to  rely  upon  governmental  aid  instead  of 
upon  self-help.  It  was  often  asserted  in  the  past  that 
as  a  result  of  this  reliance  upon  government  for  aid 
in  maintaining  high  prices  the  American  manufacturers 


THE  ECONOMIC  BASIS  OF  PROTECTION.        35 

made  use  of  poor  machinery,  and  did  not  exert  that 
care  they  should  to  economize  labor  in  their  factories. 
For  a  long  time  these  arguments  were  among  the  most 
popular  used  by  free-traders,  and  there  seemed  to  be 
many  things  which  made  them  appear  true,  yet  our 
present  knowledge  of  productive  processes  in  America 
shows  clearly  the  falsity  of  this  charge.  There  is  no 
nation  which  makes  a  better  use  of  machinery  than  the 
Americans,  nor  is  there  any  place  where  the  tendency 
for  the  improvement  of  productive  processes  is  stronger, 
thus  showing  that  a  tariff  need  not  in  any  degree  im- 
pair the  moral  independence  of  a  people.  On  the  con- 
trary, it  seems  in  many  respects  to  strengthen  the  enter- 
prise of  those  who  are  protected  by  a  tariff,  since  the 
higher  cost  of  labor  acts  as  an  incentive  to  make  a 
greater  economy  iu  its  employment. 

Time  again  has  disproved  the  fallacy  that  the  best 
opportunities  for  labor  were  first  utilized.  The  old 
argument  concerning  the  increase  of  production  and  in 
particular  that  of  the  increase  in  the  quantity  of 
land  used  in  production  asserts  that  the  first  settlers 
of  a  country  pick  out  those  locations  from  which  they 
can  obtain  the  greatest  return.  Each  succeeding  age 
finds  that  with  the  increase  of  population  poorer  lands 
must  be  brought  into  cultivation,  and  thus  with  the 
increase  of  population  there  is  a  gradual  lowering  of 
the  margin  of  cultivation.  Such  was  the  position  held 
by  older  economists,  and  such  is  the  doctrine  that  lies 
at  the  basis  of  free-trade.  If  it  were  true,  then  there 
would  be  some  good  reasons  for  advocating  a  free-trade 
policy,  but  if  it  is  shown  that  from  the  peculiar  position 


3G        THE   ECONOMIC  BASIS  OF  PROTECTION. 

in  which  first  settlers  find  themselves  they  are  com- 
pelled to  make  use  of  the  poorer  classes  of  lands 
instead  of  the  better,  then  we  cannot  affirm  that  free- 
trade  tends  to  bring  into  use  those  classes  of  land 
which  will  give  the  highest  return.  The  first  settlers 
instead  of  coming  upon  the  best  lands  are  actually 
forced  to  cultivate  many  of  the  poorer  soils,  which  are 
easily  brought  into  cultivation  or  which  are  pecu- 
liarly adapted  to  the  cultivation  of  those  crops  for 
which  there  is  a  foreign  demand.  For  this  reason 
some  change  in  the  demand  for  food  must  precede  the 
best  use  of  the  land  of  a  country.  Some  new  market 
must  be  opened  up  which  will  afford  a  place  where  the 
new  crops  can  be  sold,  thus  enabling  the  producers  to 
use  their  land  in  a  better  manner.  With  each  exten- 
sion of  the  home  market  new  uses  for  the  land  are 
found,  and  at  the  same  time  many  classes  of  soil  which 
were  worthless  while  the  few  crops  demanded  by 
foreigners  were  produced,  now  become  the  more  pro- 
ductive part  of  the  land.  This  fact  is  clearly  illus- 
trated in  the  changes  of  value  in  Western  lands  which 
have  followed  the  creation  of  home  markets.  The 
lighter  soils  were  first  occupied  because  better  adapted 
to  the  cultivation  of  wheat.  These  soils  commanded  a 
higher  price  than  the  heavier  lands  so  long  as  the  main 
market  for  the  West  was  in  Europe.  But  when  the 
growth  of  home  markets  created  a  demand  for  corn 
instead  of  wheat,  these  heavier  lands  were  brought  into 
use,  and  soon  came  to  be  regarded  as  the  better  land  ;  and 
at  the  present  time  they  command  a  much  higher  price 
than  do  the  lighter  lands  which  were  first  used  for  wheat. 


THE  ECONOMIC  BASIS  OF  PROTECTION.        37 

A  dynamic  society  passes  from  poorer  to  better  land 
by  increasing  the  variety  of  its  food  and  the  diversity 
of  its  occupations.  It  is  only  to  a  static  society  that 
the  theory  of  free-trade  is  applicable.  Here  poorer 
resources  are  gradually  brought  into  use  through  the 
exploration  of  natural  advantages. 

Another  free-trade  argument  tries  to  show  that  pro- 
tection results  merely  in  higher  values  and  does  not 
give  any  one  an  advantage  if  all  producers  receive  a 
like  protection.  An  increase  in  the  tariff  upon  one 
article  will,  it  is  claimed,  give  an  advantage  to  the 
producers  of  this  article  at  the  expense  of  the  pro- 
ducers of  other  articles.  Place  a  tariff  upon  a  second 
article  and  then  the  advantage  of  the  two  which  have 
a  tariff  will  be  increased  in  opposition  to  the  interests 
of  the  producers  of  other  articles,  but  if  the  same  pro- 
tection is  given  to  all  producers  there  will  merely  result 
a  higher  range  of  prices,  which  will  be  of  no  advantage 
to  any  producer.  On  the  contrary,  each  producer  will 
now  be  at  a  serious  disadvantage,  because  he  is  now  cut 
off  from  foreign  resources  and  cannot  make  his  work  as 
efficient  as  formerly.  Each  citizen  would  therefore  be 
compelled  to  work  much  harder  in  order  to  procure 
every  necessity  and  comfort  which  he  enjoys.  The  re- 
sult would  be,  then,  that  while  there  was  an  equality 
in  the  position  of  producers,  yet  the  whole  effect  of  the 
tariff  would  be  an  impediment  to  progress,  and,  in  the 
end,  the  productive  power  of  the  people  would  be 
diminished. 

There  is  in  this  point  of  view  a  serious  fallacy. 
A  protective  policy  results  not  in  general  high  values, 

4 


38        THE  ECONOMIC  BASIS  OF  PROTECTION. 

but  in  the  high  value  of  commodities  produced  en- 
tirely by  labor  and  capital,  and  a  low  value  of  the 
products  of  natural  monopolies.  Free-trade  has  the 
opposite  effect.  It  tends  to  give  a  high  value  to  the 
products  of  natural  monopolies  and  increases  the  com- 
petition of  producers  of  commodities,  so  that  what  they 
produce  has  a  low  value  relative  to  the  price  of  prod- 
ucts of  natural  monopolies. 

To  illustrate  the  opposition  between  high  values  for 
finished  commodities  and  high  values  for  the  products 
of  natural  monopolies,  let  us  trace  the  progress  of  a 
nation  static  in  its  consumption  through  the  various 
stages  of  its  development  resulting  from  the  increase 
of  population.  In  a  new  country  where  there  is  free 
production  of  all  commodities  and  but  little  rent  paid 
to  the  owners  of  natural  monopolies,  there  will  be  a 
very  low  price  of  all  those  products  which  are  pro- 
duced from  resources  which  can  be  easily  monopolized 
as  population  increases.  The  production  of  food  is 
probably  the  best  illustration.  When  a  country  is  new 
the  value  of  food  is  very  low,  while  the  value  of  com- 
modities is  high  relatively  to  the  value  of  food.  Labor 
is  much  better  paid  and  but  little  of  the  total  produc- 
tion of  the  people  passes  into  the  hands  of  owners  of 
natural  monopolies.  As  soon,  however,  as  population 
begins  to  increase,  poorer  classes  of  land  are  brought 
into  use,  and  as  a  result  there  follows  a  higher  value  of 
food.  At  the  same  time  in  the  production  of  other 
commodities  there  is  a  fall  in  value,  because  the  compe- 
tition now  becomes  severer  than  formerly.  Every  in- 
crease in  population  has  two  effects :    it  increases  the 


THE  ECONOMIC  BASIS  OF  PROTECTION.        39 

competition  of  those  who  produce  commodities  and  thus 
lowers  the  values  of  commodities  which  are  purely  the 
product  of  labor ;  it  also  creates  a  demand  for  the 
lower  classes  of  land,  and  as  a  result  increases  the  value 
of  food-products.  In  both  ways  the  part  of  the  total 
production  of  the  nation  which  passes  into  the  hands  of 
those  gaining  from  the  high  price  of  food  is  increased. 
This  change  is  emphasized  with  every  increase  of  pop- 
ulation. Greater  competition  among  producers  forces 
down  the  value  of  commodities  and  at  the  same  time 
gives  to  food  a  higher  value,  until  at  length  when  pop- 
ulation has  reached  its  limit  we  have  a  very  high  value 
of  food  and  a  very  low  value  of  other  commodities, — 
just  the  opposite  of  what  we  had  in  the  beginning, 
when  commodities  had  a  high  value  and  the  food  had 
a  low  value.  With  these  conditions,  resulting  from 
the  development  of  a  nation,  clearly  in  mind,  it  will  be 
seen  that  there  is  an  opposition  between  high  values  of 
commodities  and  a  high  value  of  food  and  of  the  prod- 
ucts of  other  natural  monopolies.  If  a  high  value  is 
given  to  commodities  there  results  the  necessity  of  low 
value  to  the  products  of  the  natural  monopolies.  On 
the  contrary,  if  the  policy  of  a  country  is  such  that  it 
results  in  a  high  value  of  the  products  of  natural 
monopolies,  the  value  of  other  commodities  depending 
for  their  production  solely  upon  labor  will  be  reduced. 
A  systematic  protection  of  all  producers  will  have 
the  effect  of  raising  the  value  of  all  commodities  pro- 
duced by  thorn  and  of  lowering  the  value  of  the  prod- 
ucts of  natural  monopolies;  while  a  policy  of  free- 
trade,  if  fully  adopted  by  a  country,  will  create  a  high 


40        THE  ECONOMIC  BASIS  OF  PROTECTION. 

value  of  the  products  of  natural  monopolies  and, 
through  the  increased  competition  which  results,  a  low 
value  of  other  commodities.  It  is  therefore  not  true, 
as  is  claimed  by  many  writers,  that  a  systematic  pro- 
tection of  all  industries  of  a  country  will  neutralize  the 
effect  of  protection  and  make  it  of  no  avail.  All  those 
producers  whose  products  are  solely  the  result  of  labor 
will  have  an  increased  value,  but  the  owners  of  all 
natural  resources,  which  can  be  easily  monopolized  as  a 
result  of  increased  demand,  will  have  a  lower  value. 
For  this  reason  the  burden  of  a  protective  policy  falls 
upon  those  who  are  receiving  their  iucomes  from 
natural  monopolies,  while  those  who  compete  with  one 
another  upon  the  general  market  can  obtain  a  higher 
value  for  their  commodities  in  proportion  as  the  pro- 
tective policy  has  given  a  lower  value  to  the  products 
of  natural  monopolies. 

Every  commodity  which  is  likely  in  the  progress  of 
a  nation  to  become  a  natural  monopoly  has  a  higher 
value  if  it  is  exported  than  if  the  home  market  alone 
is  supplied.  Thus  foreign  trade  causes  the  wealth  of 
the  country  to  be  distributed  in  a  different  way  from 
what  it  would  be  if  there  was  no  foreign  trade  of  this 
kind.  The  classes  gaining  from  the  growth  of  natural 
monopolies  have  a  greater  share  out  of  the  total  pro- 
duction of  the  nation  than  they  would  have  if  the 
natural  resources  of  the  country  were  used  for  the  pro- 
duction of  those  commodities  consumed  at  home. 

The  consideration  of  general  high  values  as  a  result 
of  protection  naturally  leads  to  another  fallacy,  advanced 
by  free-traders,  that  the  tariff  is  a  burden  upon  the 


THE  ECONOMIC  BASIS  OF  PROTECTION.        41 

farmer.  They  claim  that  the  price  of  commodities 
which  farmers  have  to  sell  is  fixed  in  foreign  markets 
and  is  not  increased  by  the  action  of  the  tariff,  while 
the  articles  which  a  farmer  has  to  buy  has  an  increased 
value.  Notice  they  now  reason  from  a  stand-point  dif- 
ferent from  that  which  they  took  while  arguing  from  the 
former  position.  They  now  assert  that  protection  does 
not  result  in  general  high  prices,  but  in  a  low  price  of 
agricultural  exports  and  a  high  price  of  other  commodi- 
ties. Even  if  this  were  partially  true,  can  it  be  inferred 
that  there  is  a  burden  upon  the  farmer  ?  I  do  not 
think  so,  because  the  effect  upon  farmers'  profits  can  be 
seen  only  by  considering  another  class  of  facts  of 
special  importance  in  determining  the  productivity  of 
the  labor  upon  a  farm.  The  prosperity  of  the  farmer  is 
not  determined  by  the  price  of  any  one  crop,  but  by 
the  demand  of  the  public  for  all  that  group  of  products 
for  which  his  land  is  best  fitted.  Free-trade  may  give 
to  wheat  a  higher  value, — at  least  to  consumers, — but 
to  the  farmer  it  destroys  the  value  of  those  commodities 
which  are  not  well  fitted  for  transportation  to  distant 
markets.  With  the  opening  up  of  home  markets,  these 
new  crops  for  which  the  soil  is  better  fitted,  but  for 
which  the  soil  could  not  be  used  so  long  as  all  the  prod- 
ucts of  the  farm  had  to  be  transported  to  distant  lands, 
become  the  leading  products  of  the  farmer  and  sources 
from  which  he  obtains  the  greater  share  of  his  profits. 
Here,  again,  the  history  of  Western  development  is  of 
special  importance.  In  the  early  stages  of  the  develop- 
ment of  Western  States  wheat  was  the  main  crop,  be- 
cause of  the  necessity  of  transportation  to  distant  places 

4* 


42        THE  ECONOMIC  BASIS  OF  PROTECTION. 

to  obtain  a  market.  The  profit  of  the  farmer  there- 
fore depended  upon  the  price  of  wheat  alone.  But  what 
was  the  condition  of  the  farmer  during  this  period  ? 
The  fact  that  his  land  was  not  well  fitted  for  wheat 
caused  the  quantity  of  wheat  which  he  raised  to  be 
small  even  in  the  good  years,  and  often  his  crops  were 
complete  failures.  There  was  not  the  rapid  progress  in 
the  development  of  Western  States  that  became  possible 
when  home  markets  were  opened  up  for  crops  better 
fitted  for  the  land.  The  soil  was  so  much  better  fitted 
for  corn  than  for  wheat  that  the  gross  profits  of  the 
farmers  were  increased  by  the  substituting  of  corn  for 
wheat.  When  at  a  subsequent  period  in  the  de- 
velopment of  Western  States  a  large  use  was  made 
of  the  land  to  produce  live-stock,  the  new  uses  of 
the  land  added  to  the  profits  of  the  farmer  even 
though  the  profit  in  raising  wheat  was  not  as  great  as 
formerly. 

Notice  the  connection  between  the  lowering  of  the 
value  of  the  one  crop,  or  the  few  crops  for  winch  the 
land  is  used  when  the  cultivation  is  primitive,  and  the 
greater  gross  profits  which  follow  the  use  of  land  in 
many  ways.  With  every  increase  in  the  number  of 
products  cultivated  upon  the  land  there  can  follow  a  re- 
duction in  the  profit  of  the  staple  crop  of  the  previous 
period  and  yet  the  condition  of  the  farmer  be  improved. 
The  better  use  of  his  land  through  additional  crops 
will  enable  him  to  get  an  increase  of  profit  notwith- 
standing the  loss  from  the  reduced  value  of  the  old 
crops.  Suppose  wheat  is  the  first  crop  for  which  the 
land  is  used,  then  corn  comes  in   as  a   second   crop, 


THE  ECONOMIC  BASIS  OF  PROTECTION.        43 

finally  grass  as  a  third,  and  then  after  years  some  root 
crop  is  added,  what  effect  on  profits  will  follow  each 
additional  use  of  the  land  ?  The  price  of  wheat  may 
fall  when  corn  is  brought  into  use,  yet  the  profits 
obtained  from  the  cultivation  of  corn  will  be  so  much 
greater  than  the  loss  from  the  lower  value  of  wheat 
that  the  farmer  will  be  in  a  more  prosperous  condition 
when  he  makes  use  of  his  land  with  these  two  crops 
than  if  for  wheat  alone.  When  the  land  is  used  a  part 
of  the  time  for  grass,  there  might  follow  another  fall 
in  value  of  wheat,  and  yet  the  condition  of  the 
farmer  will  be  better  than  before,  because  the  added, 
profits  from  the  use  of  the  land  for  corn  and  grass  will 
be  greater  than  the  loss  from  the  lower  value  of  wheat. 
In  the  same  way  the  additional  use  of  the  land  for 
roots  will  produce  a  like  result.  The  new  crop  will 
increase  the  profits  of  the  farmer  and  compensate  for  the 
loss  from  the  lower  value  of  the  crop  he  first  produced. 

The  labor  of  the  farmer  thus  becomes  more  pro- 
ductive through  the  increased  demand  for  new  com- 
modities from  home  producers.  The  interests  of  the 
farmer  are  in  harmony  with  the  interests  of  other  indus- 
tries, although  the  development  of  home  conditions 
may  give  a  lower  value  to  some  old  crop  for  which  the 
land  has  been  used  too  much. 

This  same  fact  is  shown  clearly  in  the  development 
of  agricultural  conditions  in  England  following  the 
introduction  of  free-trade.  If  we  compare  prices  in 
England  of  wheat,  barley,  and  oats  for  the  period  end- 
ing 1846  and  for  a  second,  period  ending  1875,  it  will 
be  seen  that  the  value  of  wheat  has  diminished,  while 


44        THE  ECONOMIC  BASIS  OF  PROTECTION. 

the  value  of  barley  and  oats  has  increased.*  As  a 
result  the  total  value  derived  from  a  given  quantity 
of  barley,  wheat,  and  oats  is  greater  for  the  later 
period  than  for  the  former.  The  farmer  of  England 
has  lost  something  upon  each  bushel  of  wheat  that  he 
produces,  but  this  is  more  than  compensated  for  by  the 
increased  price  of  barley  and  oats.  Should  we  bring 
other  crops  than  these  into  consideration,  the  advantage 
of  the  English  farmers  under  the  later  period  would  be 
more  clearly  seen,  because  the  prosperity  of  England 
created  a  demand  for  many  articles  which  could  not  be 
raised  to  any  extent  at  earlier  periods.  The  price  of 
meat  and  dairy  products  was  increased  fifty  per  cent. 
The  losses  therefore  which  the  farmer  sustained  from 
the  slight  fall  in  the  value  of  wheat  has  been  more 
than  made  up  in  the  increased  value  of  other  com- 
modities which  he  can  now  produce  and  for  which 
there  was  formerly  but  little  market.  The  same  con- 
ditions are  true  of  every  market  where  there  is  an  in- 
creasing demand  for  a  greater  variety  of  products. 
The  losses  which  the  producer  sustains  upon  the  few 
articles  demanded  by  persons  living  in  a  primitive  way 
are  much  more  than  made  up  by  the  new  profits  which 
arise  from  the  crops  for  which  such  persons  create  no 
demand. 

*  See  the  article  on  Com.  Trade  in  the  Encyclopaedia  Britan- 
nica. 


CHAPTER    V. 

NATURAL,    MONOPOLIES    POSTERED    BY    FREE-TRADE. 

There  are  few  classes  of  economic  phenomena  at- 
tracting as  much  attention  as  monopolies.  Nearly 
every  economic  doctrine  has  been  modified  in  some  way 
by  their  influence.  It  is  often  claimed  by  free-traders 
that  the  policy  of  protection  favors  monopolies  because 
it  excludes  foreign  competition.  Let  us  therefore  ex- 
amine this  whole  topic  with  care  and  discover,  if  pos- 
sible, what  is  the  real  cause  of  monopolies,  and  what 
policy  it  is  that  favors  them.  To  do  this  we  must  in- 
vestigate the  relation  between  the  value  of  those  com- 
modities which  can  be  produced  without  any  limit  and 
those  other  commodities  whose  products  are  natural 
monopolies. 

The  doctrine  of  value  in  its  first  form  owed  its 
origin  to  primitive  nations  where  monopolies  wrere  due 
to  governmental  interference  and  was  developed  before 
the  time  when  natural  monopolies  attracted  attention. 
It  is  therefore  easy  to  see  why  the  early  economists 
should  assume  as  an  ideal  state  a  nation  where  there 
were  no  monopolies  and  where  low  prices  would  give 
back  to  consumers  what  it  took  away  from  them  as 
producers.  This  conception  is  clearly  stated  by  all  the 
early  economists,  particularly  by  Adam  Smith  and  his 
followers.     At  a  later  period  there  came  into  prominence 

45 


46        THE  ECONOMIC  BASIS  OF  PROTECTION. 

a  class  of  monopolies  not  based  upon  governmental  in- 
terference, but  arising  from  the  natural  conditions  found 
in  production.  Under  such  economic  conditions  there 
is  no  longer  any  assurance  that  the  losses  which  pro- 
ducers sustain  by  a  lowering  of  prices  come  back  again 
to  them  as  consumers.  Where  natural  monopolies 
abound  it  is  more  likely  that  low  prices  for  commodities 
will  result  in  an  increased  price  of  those  products  which 
are  natural  monopolies,  than  that  the  consumers  of 
commodities  will  secure  the  advantage.  The  reasoning, 
therefore,  of  the  earlier  economists  is  quite  defective, 
unless  with  the  exception  of  Ricardo.  That  he  was 
conscious  of  the  limitation  which  must  be  given  to  his 
law  of  value  and  of  the  relation  between  the  value 
of  commodities  and  of  the  products  of  natural  monop- 
olies, is  shown  by  the  following  statement :  "  In  speak- 
ing, then,  of  commodities,  of  their  exchangeable  value, 
and  of  the  laws  which  regulate  their  relative  prices, 
we  always  mean  such  commodities  as  can  be  increased 
in  quantity  by  the  exertion  of  human  industry,  and  on 
the  production  of  which  competition  operates  without 
restraint."  Had  all  the  subsequent  economists  kept 
this  limitation  in  mind  the  later  development  of 
economics  woidd  have  been  more  logical.  Unfor- 
tunately, they  lost  sight  of  the  limitation  and  adhered 
to  that  older  theory  of  value  which  supposes  that  all 
commodities  can  be  produced  in  unlimited  quantities. 
The  doctrine  of  Ricardo  can  be  modified  to  suit  the 
present  situation  by  emphasizing  the  opposition  between 
the  value  of  food  and  raw  materials  and  the  value  of 
finished  commodities.     At  an  early  stage  in  the  devel- 


THE   ECONOMIC  BASIS  OF  PROTECTION.        47 

opment  of  any  nation  the  price  of  food  and  material 
is  low  and  stands  in  direct  relation  to  the  quantity  of 
labor  needed  to  produce  them.  At  this  time,  also,  the 
value  of  finished  commodities  is  high  ;  that  is,  a  small 
quantity  of  them  will  exchange  for  a  large  quantity  of 
food  and  raw  material.  With  every  increase  in  the 
population  of  a  nation  not  increasing  the  variety  of  its 
consumption  and  the  uses  of  its  land,  less  fertile  lands 
and  poorer  natural  resources  are  brought  into  use,  and 
the  price  of  food  and  raw  material  is  raised.  The 
increase  of  population,  however,  creates  a  keener  com- 
petition among  the  producers  of  commodities,  and  as  a 
result  they  bear  a  lower  price.  Every  future  increase 
in  population  adds  to  this  contrast  between  the  value  of 
food  and  material  and  that  of  finished  commodities. 
As  all  natural  resources  are  limited  in  quantity,  the 
surplus  population  cannot  find  employment  upon  them, 
but  must  seek  work  in  competition  with  their  fellows 
who  are  engaged  in  the  manufacture  of  finished  com- 
modities. For  these  reasons  a  change  in  prices,  due  to 
increasing  competition  in  a  static  society  is  not  nominal. 
Any  decrease  in  the  price  of  commodities  does  not  result 
in  an  advantage  to  consumers ;  the  advantage  is  secured 
by  those  who  profit  by  the  increased  price  of  food  and 
material.  Competition  lowers  wages  and  interest,  thus 
taking  from  those  not  exempt  from  its  crushing  power, 
and  at  the  same  time  increasing  the  advantage  of  mo- 
nopolies to  a  corresponding  degree. 

The  policy  of  free-trade  has  the  same  effect  upon  a 
new,  progressive  nation  like  America  that  would  result 
from  a  large  increase  of  its  own  population.     The  for- 


48        THE  ECONOMIC  BASIS  OF  PROTECTION. 

eign  countries  with  which  it  must  compete  in  the  pro- 
duction of  commodities  have  a  lower  rate  of  interest 
and  wages.  Home  producers  must  therefore  lower  the 
price  of  commodities  so  that  they  can  compete  with 
foreign  countries.  The  value  of  raw  material  and  food 
rises,  and  a  larger  part  of  the  total  production  of  a 
nation  goes  to  those  who  enjoy  rent  and  the  product  of 
other  natural  monopolies,  or  who  engage  in  the  trans- 
portation or  exportation  of  food.  With  free-trade 
poorer  land  of  the  class  suitable  for  crops  demanded  by 
foreigners  will  be  brought  into  use  than  would  be  the 
case  if  the  land  of  our  country  were  used  only  to  furnish 
food  for  its  own  inhabitants.  There  will  result  a  lower 
margin  of  cultivation  and  higher  rents,  from  which  all 
consumers  of  food  at  home  will  be  in  a  worse  condition 
than  they  would  be  with  less  demand  for  these  articles 
of  food  and  a  smaller  use  of  the  poor  land  of  our  country. 
If  the  growth  of  foreign  trade  increases  the  share 
which  goes  to  natural  monopolies  connected  with  the 
food-supply,  we  cannot  estimate  the  benefits  of  foreign 
trade  in  as  simple  a  manner  as  is  usually  done.  At 
the  present  time  the  whole  problem  is  viewed  from  the 
stand-point  of  the  exporters  of  food.  The  person  who 
exports  food  and  brings  back  in  exchange  for  it  cer- 
tain foreign  commodities  makes  a  gain,  but  this  gain 
must  not  be  regarded  as  a  gain  to  the  nation,  since  the 
interest  of  the  exporter  may  not  be  in  harmony  with 
the  public  interest.  To  estimate  correctly  the  results 
of  foreign  trade  two  other  elements  must  be  considered. 
The  one  is  the  loss  to  the  public  on  the  food  consumed 
at  home  through  the  higher  price  which  results  from  a 


THE  ECONOMIC  BASIS  OF  PROTECTION.        49 

greater  demand  for  exportable  food,  and  the  other  the 
loss  our  agricultural  classes  sustain  through  the  re- 
duced variety  of  crops.  The  foreign  market  does  not 
create  a  demand  for  the  bulky  agricultural  products. 
It  is  merely  such  light,  compact  articles  as  wheat,  to- 
bacco, or  cotton,  that  the  foreign  consumer  wants  from 
America.  So  long  as  American  land  is  used  merely 
for  advantage  of  foreigners  the  profit  which  might  be 
obtained  from  the  bulky  crops  is  entirely  lost,  and  this 
loss  to  the  farmer  must  be  added  to  the  loss  which  con- 
sumers of  food  at  home  sustain  by  the  higher  price 
which  the  foreign  demand  for  food  causes  them  to  pay. 

At  first  sight  it  may  seem  strange  that  I  should 
include  the  farmers  with  the  losers  from  the  exporta- 
tion of  food  and  from  the  high  price  which  consumers 
pay  for  it  at  home.  There  is,  however,  a  fallacy  in  re- 
garding the  price  for  food  which  consumers  pay  as  the 
same  as  the  price  which  the  farmer  gets.  If  the  mar- 
kets were  local,  so  that  the  farmer  has  direct  access  to 
consumers,  the  two  prices  coincide.  When,  however, 
the  consumer  is  distant  from  the  farmer,  this  direct  re- 
lation is  destroyed.  The  consumer  pays  a  high  price 
for  his  food  at  the  same  time  that  the  farmer  is  getting 
a  low  price.  Under  existing  conditions  America  has 
all  the  disadvantages  of  a  high  price  of  food — by 
which  term  I  always  mean  a  high  price  to  consumers — 
without  the  advantages  which  farmers  should  have 
from  it.  The  high  price  merely  increases  the  share 
secured  by  the  many  monopolies  standing  between  the 
farmer  and  the  consumer. 

To  illustrate  more  clearly  the  connection  between 
c       d  5 


50        THE  ECONOMIC  BASIS  OF  PROTECTION. 

a  free-trade  policy  and  the  growth  of  natural  monopo- 
lies, let  us  assume  that  there  are,  side  by  side,  two 
isolated  nations,  with  the  same  natural  resources,  the 
one  having  a  much  greater  population  than  the  other. 
In  the  nation  having  the  greater  pressure  of  population 
there  would  be  a  lower  value  for  commodities  and  a 
higher  value  of  the  products  controjled  by  natural 
monopolies.  As  a  result  of  this  social  state,  wages 
and  interest  would  be  low  and  the  pressure  of  competi- 
tion would  take  from  producers  everything  but  a  mere 
minimum.  In  the  other  nation  with  less  population, 
there  would  be  a  much  higher  price  for  all  commodities 
and  a  low  price  for  the  products  of  natural  monopolies. 
Wages  and  interest  would  be  high,  while  the  value  of 
natural  monopolies  would  be  low.  Suppose  now  these 
two  nations,  which  have  so  far  in  their  development 
been  isolated,  should  be  thrown  into  commercial  rela- 
tions. The  low  price  of  commodities  in  the  first  na- 
tion would  make  it  profitable  to  export  many  kinds 
of  goods  into  the  second  nation,  while  the  high  price 
of  food  in  the  first  nation  would  cause  a  great  expor- 
tation of  food  from  the  second  nation.  The  result 
would  be  a  decrease  in  wages  and  interest  in  the  second 
nation.  The  demand  for  food  would  be  so  much  in- 
creased that  its  citizens  would  be  compelled  to  pay  a 
much  higher  price  for  it,  while,  on  the  other  hand,  the 
possibility  of  importing  commodities  from  a  country 
where  their  price  was  low  would  reduce  the  price  of 
these  commodities  in  a  way  that  would  cut  off  another 
slice  from  both  wages  and  interest. 

Suppose  we  take  as  an  additional  illustration  two 


THE  ECONOMIC  BASIS  OF  PROTECTION.        51 

other  nations,  the  one  being  in  a  static  state,  where 
there  is  a  high  price  of  food  and  material  and  a  low 
price  of  finished  commodities  resulting  from  the  press- 
ure of  population  and  the  limited  opportunities  for 
labor  which  the  nation  has  opened  up  to  its  inhabi- 
tants. The  other  nation  is  in  a  dynamic  state,  caused 
by  the  fact  that  the  energy  of  the  people  is  so  great  that 
they  are  opening  up  new  opportunities  for  labor  as  rap- 
idly as  population  increases.  In  this  nation  the  price  of 
commodities  would  be  high  and  the  value  of  the  products 
of  natural  monopolies  low.  Suppose  these  two  nations 
were  brought  into  commercial  relation  with  one  another ; 
what  would  be  the  result?  Would  not  the  great  de- 
mand for  food  on  the  part  of  the  static  nation  cause  a 
higher  price  of  food  in  the  dynamic  nation,  and  would 
not  the  lower  price  of  commodities  in  the  static  nation 
reduce  the  price  of  commodities  in  the  dynamic  nation? 
Evidently  there  could  be  no  other  outcome.  The  pro- 
gressive nation  would  be  checked  in  its  development 
and  probably  brought  into  a  static  state  from  the  de- 
crease in  the  prosperity  of  its  inhabitants  and  through 
the  great  increase  in  the  share  of  its  produce  which  now 
goes  to  the  owners  of  natural  monopolies. 

When  the  question  is  asked,  What  are  the  causes 
which  check  the  opening  up  of  new  opportunities  for 
labor  and  force  a  nation  into  a  static  state  ?  we  must 
look  at  the  matter  in  a  broad  way  before  an  answer  is 
given.  If  all  the  opportunities  for  labor  had  no 
direct  connection  with  one  another,  so  that  the 
person  who  opened  up  a  new  opportunity  for  labor 
would  not  interfere  with  those  who  utilize  the  present 


52         THE  ECONOMIC  BASIS  OF  PROTECTION. 

opportunities  for  labor,  there  would  be  no  great  obstacle 
to  a  rapid  progress  in  all  directions.  This  state  of 
affairs  is  found  in  a  nation  having  vast  tracts  of  new 
land  which  can  be  had  by  mere  occupation.  As  soon 
as  the  additional  opportunities  for  labor  are  not  to  be 
found  in  new  regions,  but  must  be  sought  in  districts 
now  occupied,  the  present  user  of  the  good  opportunity 
for  labor  stands  in  the  way  of  the  better  use  which  the 
new  applicant  for  it  would  make.  Take  as  a  specific 
example  the  introduction  of  the  sugar-beet  as  a  new 
crop  into  a  country.  The  grower  of  beets  cannot  find 
new  land,  but  must  make  a  bid  for  the  old  land  now 
used  for  other  crops.  He  must  pay  as  rent  for  this 
land  a  sum  equal  to  the  value  of  the  land  to  its  present 
occupiers.  There  is  thus  a  burden  upon  the  production 
of  the  sugar-beet  hindering  its  increase  until  the  pro- 
duction becomes  more  profitable  than  it  would  need  to 
be  if  there  were  no  competitors  for  the  land. 

In  this  way  the  people  of  a  lower  civilization  stand 
in  the  way  of  a  people  of  a  higher  civilization.  A 
higher  civilization  cannot  displace  the  lower  as  soon  as 
the  advantage  from  their  methods  of  production  is 
greater  than  the  advantage  of  the  cruder  production  of 
their  predecessors.  The  new  will  not  displace  the  old 
until  the  advantage  of  the  new  production  is  so  much 
Greater  than  the  old  as  to  enable  the  higher  civilization 
to  buy  the  land  and  other  natural  resources  of  the  lower 
civilization  which  preceded  them. 

In  the  same  way,  whenever  two  nations  stand  in 
commercial  relations  with  one  another,  the  people  of 
the  one  country  cannot  secure  the  full  advantage  which 


THE  ECONOMIC  BASIS  OF  PROTECTION.        53 

comes  from  their  productive  agents.  Before  Americans 
can  use  the  land  of  their  country  for  their  own  pur- 
poses they  must  pay  the  full  value  of  that  land  to 
Europeans.  If  a  farm  in  Ireland  will  give  a  rent  of 
ten  dollars  an  acre  producing  grain  for  the  English 
market,  Irish  consumers  cannot  obtain  that  farm  to 
produce  food  for  themselves  unless  they  are  willing  to 
pay  as  high  rent.  This  is  the  real  burden  of  free  com- 
merce. The  more  progressive  nations  must  continually 
pay  to  the  owners  of  natural  monopolies  a  sum  equal  to 
the  full  value  of  their  natural  resources  to  the  less  pro- 
gressive nations  with  whom  they  come  in  contact.  So 
long  as  foreign  competition  has  this  effect  free  com- 
merce will  be  a  hinderance  to  the  development  of  the 
more  progressive  nations,  and  prevent  that  rapid  ad- 
vance of  the  whole  world  which  might  follow  the  best 
use  of  all  resources  by  the  most  progressive  nations. 

Note. — It  is  not  my  purpose  at  present  to  examine  into  the 
origin  and  causes  of  rent.  They  are  discussed  in  "  Premises  of 
Political  Economy"  and  in  "  Stability  of  Prices."  It  may,  how- 
ever, be  advisable  to  restate  my  position.  In  a  static  society  rent 
is  caused  by  the  necessity  of  cultivating  poorer  lands  to  provide 
for  an  increasing  population.  In  a  dynamic  society  we  also  find 
rent,  but  from  another  cause.  Better  lands  are  coming  into  use, 
yet  the  increase  of  its  productivity  is  not  as  rapid  as  that  of  the 
other  factors  in  production.  The  most  slowly  increasing  factor  in 
production  gets  a  larger  share  of  the  increase  of  production  due  to 
improvements  than  the  other  factors.  If  the  productive  power 
of  a  nation  increases  twenty  per  cent,  while  the  return  from  land 
increases  ten  per  cent.,  there  will  be  the  same  increase  of  rent  that, 
a  static  nation  would  have  if  land  poorer  by  ten  per  cent,  were 
brought  into  cultivation. 

My  illustrations  of  changes  in  rent  are  taken  from  static  soci- 
eties, because  the  Ricardian  terms  are  more  familiar  to  readers. 

ri* 


CHAPTER    VI. 

WHAT    FIXES   THE    RATE   OF   WAGES. 

In  discussions  about  the  rate  of  wages  the  causes 
which  determine  the  rate  have  usually  been  viewed  in 
too  simple  a  manner.  It  has  been  supposed  that  there 
is  a  close  connection  between  the  productive  power  of 
a  nation  and  the  rate  of  wages.  In  fact,  it  is  often 
argued  as  if  wages  absorbed  the  whole  product  of  in- 
dustry. If  this  view  were  correct,  to  decide  whether 
or  not  a  given  policy  would  increase  the  productive 
power  of  the  nation  would  also  determine  its  effect 
upon  the  rate  of  wages.  If  there  were  no  natural 
monopolies  to  absorb  a  large  part  of  the  return  from 
the  increase  of  the  productive  power,  there  would  be 
this  connection  between  the  productive  power  of  the 
nation  and  its  rate  of  wages.  In  a  nation,  however, 
which  has  a  large  number  of  natural  monopolies  the 
rate  of  wages  is  fixed  not  by  the  average  obtained  by 
dividing  the  gross  produce  by  the  number  of  laborers, 
but  by  the  return  from  the  least  productive  opportunity 
for  labor  which  the  nation  uses.  Take,  for  example,  a 
number  of  laborers  engaged  in  the  production  of  wheat. 
If  each  laborer  has  a  farm  of  equal  productivity,  the 
average  return  of  all  the  farms  would  be  the  rate  of 
wages.  If,  on  the  contrary,  the  farms  have  different 
degrees  of  fertility,  the  rate  of  wages  can  no  longer  be 
54 


THE  ECONOMIC  BASIS  OF  PROTECTION.        55 

determined  in  this  manner.  Those  laborers  who  secure 
the  most  productive  land  must  now  pay  a  rent  for  the 
land  equal  to  the  difference  between  its  fertility  and 
that  of  the  poorest  land  in  use.  Suppose,  for  example, 
there  were  three  classes  of  land,  one  yielding  thirty, 
another  twenty -five,  and  the  third  twenty  bushels  to  the 
acre.  Only  a  part  of  the  laborers  can  find  employ- 
ment upon  the  land  producing  thirty  bushels  to  the 
acre,  and  hence  competition  between  them  for  this  land 
will  .give  to  the  owner  as  rent  all  the  difference  between 
its  fertility  and  the  poorest  land  which  must  be  culti- 
vated. Since  all  the  laborers  cannot  be  employed  either 
upon  the  land  yielding  thirty  or  twenty-five  bushels  to 
the  acre,  the  poorest  land  in  use  will  give  the  laborer 
employed  upon  it  but  twenty  bushels.  As  long  as  part 
of  the  labor  must  be  employed  upon  this  poor  land,  the 
occupiers  of  the  better  land  must  give  a  rent  equal  to 
the  difference  between  this  fertility  and  that  of  the 
poorest  land  ;  that  is,  those  that  occupy  the  land  yield- 
ing thirty  bushels  an  acre  must  give  a  rent  of  ten 
bushels  an  acre,  and  those  occupying  the  land  pro- 
ducing twenty-five  bushels  to  the  acre  must  give  a  rent 
of  five  bushels  an  acre. 

Suppose  each  laborer  could  cultivate  sixty  acres  of 
land,  and  of  three  laborers  the  one  upon  land  yielding 
thirty  bushels  to  the  acre  would  secure  a  crop  of 
eighteen  hundred  bushels,  the  one  upon  the  land  yield- 
ing twenty-five  bushels  to  the  acre  would  secure  a  crop 
of  fifteen  hundred  bushels,  while  the  one  upon  laud 
yielding  twenty  bushels  to  the  acre  would  secure  a  crop 
of   twelve    hundred   bushels.     If    the    wages    of    the 


56        THE  ECONOMIC  BASIS  OF  PROTECTION. 

laborers  equalled  the  average  return  from  the  whole 
land,  each  laborer  would  secure  fifteen  hundred  bush- 
els. Under  the  given  conditions,  however,  the  laborers 
cannot  each  receive  that  much.  The  laborer  upon  the 
poorest  land  cannot  receive  more  than  twelve  hundred 
bushels  because  that  is  all  his  land  would  yield.  The 
laborers  upon  the  other  farms  cannot  receive  more  than 
he  does  because  he  would  compete  with  them  for  the 
possession  of  these  farms,  and  thus  cause  a  rent  to  be 
paid  by  the  cultivator  of  the  best  land  of  six  bushels, 
and  by  the  cultivator  of  the  second  best  land  of  three 
bushels.  The  result  is  that  on  the  three  farms  each 
laborer  secures  twelve  hundred  bushels,  while  nine 
hundred  bushels  of  the  produce  of  the  two  better 
farms  will  go  to  their  owners  as  rent. 

This  reduction  of  wages,  however,  is  not  an  economic 
necessity,  but  the  result  of  a  wrong  policy.  The  lower- 
ing of  wages  and  the  increase  of  rent  which  ac- 
companies it  usually  takes  place  with  that  increase  of 
the  average  return  for  labor  in  all  occupations.  The 
cause  of  a  reduction  of  wages  lies  in  the  passive  policy 
on  the  part  of  the  people,  by  which  they  allow  the  in- 
crease of  population  to  find  employment  upon  poorer 
land  instead  of  opening  up,  as  they  should,  new  oppor- 
tunities for  labor  as  rapidly  as  population  increases. 
The  experience  of  the  world  has  abundantly  proved 
that  the  best  opportunities  for  labor  are  not  those  which 
are  first  brought  into  use.  This  fact  can  be  most  clearly 
demonstrated  in  relation  to  the  order  in  which  land 
has  been  occupied.  When  a  country  is  first  opened  up 
the  settlers  do  not  make  use  of  the  best  land.     They 


THE  ECONOMIC  BASIS  OF  PROTECTION.        57 

first  seek  those  light  soils  which  are  fitted  for  wheat 
which  can  be  exported  to  distant  markets.  As  soon  as 
these  soils  have  been  in  a  measure  exploited,  then  re- 
source is  had  to  the  heavier  soils,  which  are  the  better 
soils.  They  are  enabled  to  make  this  change  through 
the  increase  of  population  and  the  growth  of  home 
markets.  New  crops  can  now  be  cultivated  and  a 
higher  return  for  labor  can  be  secured  to  those  who 
occupy  the  land.  California,  for  example,  was  at  first 
settled  merely  on  account  of  its  gold,  and  the  people 
did  not  resort  to  other  means  of  employment  until  the 
gold  mines  were  exploited,  through  which  the  return 
for  labor  was  increased.  The  same  fact  is  true  of  the 
resources  of  other  States.  Michigan,  for  example,  has 
been  stripped  of  its  forests  by  the  action  of  the  same 
law,  and  the  cotton-lands  of  the  South,  as  well  as  the 
tobacco-lands  of  Virginia  and  Kentucky,  have  lost 
much  of  their  fertility  through  this  bad  policy.  A 
passive  policy  which  allows  every  individual  to  use  and 
exploit  for  his  own  advantage  the  original  resources 
of  the  country  necessarily  leads  to  a  reduction  in  the 
rate  of  wages,  because  the  best  of  these  opportunities 
will  be  first  utilized,  and  as  population  increases  the 
new  laborers  are  compelled  to  use  the  poorer  resources 
of  the  same  kind  as  those  already  in  use.  On  the  other 
hand,  should  the  nation  adopt  an  active  policy,  the  rate 
of  wages  will  rise  and  not  fall,  since  it  would  prevent 
to  a  large  degree  the  exploitation  of  the  original  re- 
sources and  contribute  as  much  as  possible  to  the 
opening  up  of  new  ones. 

The  rate  of  wages  is  directly  affected  also  by  the 


58        THE  ECONOMIC  BASIS  OF  PROTECTION. 

consumption  of  the  people  and  the  diversity  of  occu- 
pations. If  a  people  demand  but  few  things  in  their 
daily  diet,  only  a  small  part  of  the  land  of  the  country 
is  best  fitted  for  these  articles.  As  soon  as  population 
increases  beyond  what  can  be  supported  upon  this 
small  part  of  the  land  the  rate  of  wages  must  fall, 
because  the  poorest  land  in  cultivation  will  be  much 
less  fertile  than  formerly  and  the  rate  of  wages,  as  we 
have  shown,  is  fixed  by  the  return  upon  this  poorer 
land.  Iu  the  same  way  the  rate  of  wages  is  affected 
by  the  diversity  of  the  occupations  of  the  people.  If 
there  are  but  few  occupations  the  increase  of  population 
must  soon  make  use  of  opportunities  for  labor  less  pro- 
ductive than  those  which  were  first  utilized.  If  a 
people  be  employed  only  in  the  production  of  iron 
and  coal,  poorer  mines  must  be  brought  into  use  with 
every  increase  in  population,  and  as  a  result  there 
will  be  a  gradual  lowering  in  the  rate  of  wages.  On 
the  other  hand,  if  the  increase  in  population  finds  em- 
ployment, not  in  these  occupations  but  in  new  ones,  the 
additional  laborers  will  use  the  fresh  resources  of  the 
country  and  thus  prevent  the  fall  in  wages.  Every 
increase  in  population  must  result  in  increasing  the 
variety  of  consumption  and  the  number  of  occupations 
or  a  reduction  of  wages  is  sure  to  follow. 

There  is  also  a  close  connection  between  the  rate  of 
wages  and  the  profits  secured  by  the  possessors  of 
natural  monopolies.  Everything  which  increases  the 
difference  in  the  productivity  of  any  of  the  means  of 
production  results  in  increasing  the  profits  of  those 
who  own  the  natural  monopolies.     If  new  coal  mines 


THE  ECONOMIC  BASIS  OF  PROTECTION.        59 

are  brought  into  use,  less  productive  than  those  now  in 
use,  the  price  of  coal  must  rise,  and  through  it  all  the 
owners  of  the  best  mines  will  receive  a  rent  equal  to 
the  difference  between  their  mines  and  the  new  mines. 
Suppose  other  still  poorer  mines  are  brought  into  use; 
there  will  now  another  increase  in  the  price  of  coal  fol- 
low, and  through  it  all  the  owners  of  the  better  mines 
will  receive  an  increased  rent.  What  is  true  of  coal 
mines  is  equally  true  of  any  other  means  of  production. 
With  every  increase  in  the  demand  for  raw  material  or 
for  food  in  a  static  nation  poorer  resources  are  brought 
into  use,  and  with  it  the  profits  of  the  owners  of 
natural  monopolies  are  increased,  and  at  the  expense 
of  those  who  live  from  wages  only. 

An  active  policy  on  the  part  of  any  nation  can 
check  this  tendency  of  competition  to  lower  wages  by 
changing  the  economic  environment  of  the  country  so 
as  to  make  its  influence  less  effective.  There  are 
within  the  country  many  potential  opportunities  for 
labor  which  could  be  utilized  if  the  obstacles  to  their 
use  were  removed  through  a  more  active  national 
policy.  If  a  nation  wishes  to  preserve  a  high  rate  of 
wages  for  its  people  and  keep  as  much  as  possible  the 
increase  of  produce  from  going  to  the  owners  of  nat- 
ural monopolies,  it  must  endeavor  to  open  up  new 
occupations  for  its  people  and  turn  the  land  of  the 
country  to  new  uses,  so  that  all  the  people  can  find 
employment  and  be  fed  without  resorting  to  occupa- 
tions which  are  less  productive  or  to  crops  for  which 
the  land  is  poorly  fitted. 

The  commercial  relations  of  a  nation  also  are  a  de- 


60        THE  ECONOMIC  BASIS  OF  PROTECTION. 

termining  factor  in  fixing  the  rate  of  wages.  If  two 
nations  freely  exchange  commodities  with  one  another 
the  poorest  opportunity  for  labor  utilized  in  either  of 
the  nations  will  fix  the  rate  of  wages.  To  bring  out 
this  thought  more  clearly,  contrast  two  isolated  nations, 
in  one  of  which  there  is  an  active  policy  endeavoring 
to  increase  the  opportunities  for  labor  as  rapidly  as  the 
increase  in  population,  and  in  the  other  a  passive 
policy  which  compels  the  increase  of  population  to  re- 
sort to  poorer  opportunities  for  labor  of  the  few  kinds 
of  which  they  are  already  making  use.  In  the  one  coun- 
try there  would  be  a  constant  increase  in  the  rate  of 
wages,  because  every  increase  in  the  productive  power 
would  be  fairly  distributed  among  all  the  laborers 
through  the  opening  up  of  new  occupations.  In  the 
other  nation  there  would  be  a  constant  diminution  of 
wages  as  a  result  of  the  increase  in  rent  which  must 
follow  every  resort  to  poorer  natural  resources.  By 
bringing  these  two  nations  thus  far  isolated  into  com- 
mercial relations  the  rate  of  wages  in  the  progressive 
nation  will  be  reduced,  and  accompanying  this  there 
will  be  a  corresponding  rise  in  rent.  There  cannot  be 
two  prices  for  commodities  upon  the  same  market,  and 
the  higher  price  of  food  and  of  all  raw  material  in  the 
less  progresssive  nation  will  cause  a  similar  price  to  be 
paid  for  them  in  the  other  nation,  and  while  this 
high  price  for  food  and  raw  material  is  paid  the  rate 
of  wages  will  be  fixed  by  the  poorest  opportunity  for 
labor  in  the  less  progressive  country.  A  nation  can- 
not, therefore,  adopt  a  system  of  free-trade  without 
having  its  rate  of  wages  determined  by  the  least  pro- 


THE  ECONOMIC  BASIS  OF  PROTECTION.        61 

gressive  country  with  which  it  comes  in  contact,  nor 
can  it  prevent  that  rise  in  the  price  of  all  articles  of 
food  and  raw  material  which  will  give  to  the  owners 
of  natural  resources  all  that  share  of  the  annual  prod- 
uce which  is  now  obtained  by  the  owners  of  natural 
monopolies  in  countries  with  which  it  has  commerce. 
Cheap  labor  means  a  high  price  for  food  and  raw 
material,  and  any  nation  cannot  come  into  free  com- 
mercial relations  with  a  country  having  cheap  labor 
without  forcing  upon  itself  that  same  unequal  distri- 
bution of  wealth  from  which  the  other  country  suffers. 
Notice  that  I  say  that  competition  with  cheap  labor 
will  lower  the  rate  of  wages  of  the  superior  workmen 
to  the  level  of  the  cheaper  laborers,  and  not  that  the 
wages  of  the  efficient  and  inefficient  will  be  made  equal 
by  competition.  The  rate  of  wages  is  determined  by 
the  objective  conditions  by  which  the  laborers  are  sur- 
rounded. Differences  in  wages  are  determined  by  sub- 
jective differences  in  the  laborers  themselves,  or  by 
peculiar  objective  conditions  that  affect  only  a  part  of 
the  laborers.  Economic  writers  from  Smith  to  Mill 
have  in  treating  of  wages  followed  this  plan.  They 
have  regarded  skill  among  the  causes  determining 
differences  in  wages  and  not  among  the  causes  fixing 
the  rate  of  wages.  The  rates  of  wages  of  two  countries 
are  at  a  level  not  when  all  the  laborers  get  the  same 
pay  for  a  day's  work  (that  never  could  happen),  but 
when  the  differences  in  wages  come  only  from  differ- 
ences in  the  laborers'  skill  or  from  objective  conditions 
affecting  particular  classes  of  laborers.  The  rates  of 
wages    are    equal  if   the  price  of  food    and    of  raw 

6 


62        THE  ECONOMIC  BASIS  OF  PROTECTION. 

materials,  the  use  of  machinery,  and  other  objective 
conditions  which  determine  the  efficiency  of  natural 
industry  arc  the  same.  When  we  say  that  the  rates  of 
wages  in  England  and  Scotland  are  at  a  level,  it  means, 
that  the  wages  of  each  class  of  workmen  in  Scotland 
stand  in  the  same  relation  to  other  classes  of  workmen 
in  Scotland  that  the  wages  of  similar  classes  do  in 
England,  and  that  no  workman  could  increase  his 
wages  by  doing  the  same  kind  of  work  in  the  other 
country.  When  we  say  that  the  rate  of  wages  in 
America  is  higher  than  in  England,  we  mean  that  a 
workman  by  coming  to  America  could  in  the  same 
employment  and  with  the  same  skill  get  a  greater  re- 
turn for  his  labor.  In  other  words,  that  the  objective 
conditions  of  America  are  more  favorable  than  those 
of  England,  because  we  are  using  better  mines,  land, 
machinery,  etc.  I  do  not  claim  that  cheap  labor  will 
take  from  the  higher  workmen  the  differences  in  wages 
due  to  their  skill,  but  it  will  take  from  them  that  part  of 
their  wages  due  to  better  land,  mines,  machinery,  etc. 
Cheap  labor  is  detrimental  to  higher  classes  both  by 
taking  from  them  the  advantage  of  superior  natural 
resources  and  by  reducing  the  proportion  of  the  skilled 
labor  to  cheap  labor  in  all  occupations. 

Suppose  in  an  isolated  nation  the  skill  of  all  the 
workmen  was  doubled.  How  much  would  the  wages 
be  increased  ?  If  free-traders  are  right,  they  would  be 
doubled.  I  say  the  increase  would  be  much  greater,  at 
least  threefold.  By  doubling  the  skill  a  twofold  return 
could  be  obtained  in  the  same  mines,  on  the  same  land, 
and  with  the  same  machinery.    More  skill  in  the  better 


THE  ECONOMIC  BASIS  OF  PROTECTION.        63 

mines  and  on  the  better  land  would  throw  the  poorest 
mines  and  land  out  of  use,  and  would  also  allow  a  use 
of  better  machinery.  In  this  way  not  only  would  the 
return  for  labor  be  more  than  doubled,  but  the  distri- 
bution of  wealth  would  be  changed  in  a  way  that  would 
take  from  rent  and  add  to  wages.  If  we  follow  the 
effects  of  increased  skill  and  intelligence  upon  consump- 
tion, other  causes  increasing  wages  will  be  found.  The 
direction  of  consumption  would  be  changed  to  foods 
and  pleasures,  which  are  less  exhausting  of  natural  re- 
sources, and  this  change,  accompanied  by  a  greater 
economy  in  what  the  wages  bring,  would  enable  the 
nation  to  supply  its  wants  without  using  as  poor  a  class 
of  mines  and  land  as  would  otherwise  be  necessary. 

By  taking  an  isolated  nation  as  an  example  we  get  a 
basis  to  determine  the  national  loss  from  cheap  labor. 
The  evil  effect  of  cheap  foreign  labor  is  equally  great. 
It  is  more  hidden  from  view  by  the  circumstances 
which  aid  the  free-trade  fallacies.  Take  any  case 
where  interest  or  prejudice  does  not  obscure  the  vision, 
and  it  will  become  apparent  that  the  competition  of  cheap 
labor  reduces  the  rate  of  wages,  and  at  the  same  time, 
by  forcing  the  use  of  poorer  land  and  mines,  makes 
the  distribution  of  wealth  more  unequal.  To  save  their 
favorite  doctrine  from  comment  free-traders  are  will- 
ing to  minimize  the  national  benefit  which  comes  from  an 
increase  of  skill  and  intelligence,  but  this  policy  should 
not  keep  a  clear  thinker  from  seeing  that  this  increase 
has  a  double  effect  upon  the  product  of  industry  through 
which  the  latter  increases  at  a  much  more  rapid  rate 
than  the  former. 


CHAPTER    VII. 

THE   COST   OF   LABOR. 

In  an  examination  of  the  causes  which  determine 
the  present  location  of  national  industries  two  leading 
elements  come  into  consideration.  The  one  is  the 
wages  paid  the  laborer,  the  other  is  his  efficiency.  An 
employer  would  not  move  his  factory  from  New  Eng- 
land to  the  South  merely  because  he  could  there  secure 
his  workmen  at  lower  wages.  If  in  New  England  he 
paid  two  dollars  a  day,  even  as  low  a  rate  as  a  dollar  a 
day  in  the  South  might  be  no  temptation  to  change  the 
location  of  his  factory.  Southern  laborers  are  not 
accustomed  to  factory-work,  nor  have  they  that 
dexterity  needed  to  use  machinery  at  an  advantage. 
Asa  result,  at  the  end  of  each  day  the  employer  does 
not  find  that  quantity  of  work  done  he  would  expect 
in  the  North,  and  the  quality  of  the  work  may  also  be 
inferior.  The  Northern  laborer  received  more  pay 
than  the  Southern,  yet  in  many  occupations  the 
efficiency  of  the  Northern  laborer  is  so  much  greater 
that  it  is  more  profitable  to  employ  him.  The  cost  of 
labor  thus  often  drives  out  the  less  efficient  man,  even 
though  he  is  willing  to  work  for  less  wages. 

The  low  cost  of  efficient  labor  is  often  used  as  an 
argument  to  show  that  a  superior  workman  needs  no 
protection  from  the  lower  wages  of  foreign  workmen. 
64 


THE  ECONOMIC  BASIS  OF  PROTECTION.        65 

In  showing  the  causes  of  the  industrial  prosperity  of 
England,  the  low  cost  of  its  labor  as  compared  with  the 
cost  of  labor  on  the  Continent  or  among  less  civilized 
races  is  always  presented  as  the  leading  element  in  its 
prosperity.  Nor  can  it  be  denied  that  to  those  persons 
who  enjoy  the  benefit  of  low  prices  without  being 
themselves  producers  this  low  cost  of  labor  is  a  great 
advantage.  They  have  all  the  benefits  of  efficient 
labor  without  sharing  in  the  disadvantages  of  intense 
competition.  It  is  certainly  advantageous  to  have 
others  "  hold  their  own"  in  a  conflict  for  cheapness, 
and  so  long  as  they  do  it  is  of  little  moment  whether 
they  get  less  wages  or  do  more  work. 

Yet,  are  we  to  judge  in  the  same  way  if  we  look  at 
the  problem  from  the  point  of  view  of  the  laborer? 
Does  not  the  doctrine  of  "holding  his  own"  mean  that 
the  laborer  should  give  up  all  claim  to  the  natural 
advantages  of  his  country  and  hand  them  over  to  other 
classes  of  society  ?  If  it  does,  certainly  no  one  else 
ought  to  complain  if  the  laborer  is  satisfied  with  merely 
"  holding  his  own."  Let  us  see  if  he  should  be  satis- 
fied. Suppose  a  country  has  fertile  lands,  fine  forests, 
immense  stores  of  coal  and  iron,  should  all  the  advan- 
tages of  these  national  resources  pass  into  the  hands  of 
other  classes  in  society  protected  from  competition,  or 
should  a  part  of  these  advantages  come  to  the  laborer 
in  the  shape  of  higher  wages?  Suppose,  further,  a 
second  nation  with  fields,  forests,  and  mines  half  as 
fertile,  should  a  workman  in  this  country  have  the 
same  rate  of  wages  as  a  workman  of  the  first  country? 
If  of  two  workmen  with  the  same  efficiency  the  one 
e  <;* 


66        THE  ECONOMIC  BASIS  OF  PROTECTION. 

in  England  works  in  a  mine  of  double  the  produc- 
tivity of  the  mine  in  France,  in  which  the  other  is 
employed,  should  they  have  the  same  wages?  At 
first  sight  it  might  seem  that  they  should  have,  and 
upon  the  fallacy  involved  in  this  superficial  view  the 
free-trade  argument  about  the  cost  of  labor  is  based. 

Let  us,  however,  look  at  the  problem  in  a  broader 
way.  The  whole  product  of  a  nation  depends  upon 
two  factors,  its  natural  advantages  and  the  efficiency  of 
its  laborers.  If  the  farms  and  mines  of  one  nation 
are  better  than  those  of  another,  there  is  added  to  the 
wealth  of  the  first  country  a  greater  product  than  is 
added  to  the  wealth  of  the  second.  If  also  the  effi- 
ciency of  the  laborers  of  the  first  country  is  greater  than 
that  of  the  second,  the  difference  between  the  wealth  of 
the  two  countries  would  be  increased.  Suppose  a  billion 
dollars  more  than  the  second  nation  gets  came  to  the 
first  nation  through  its  natural  advantages  and  another 
billion  through  the  greater  efficiency  of  its  laborers. 
When  this  sum  is  divided  among  the  participants  in 
production,  to  whom  shall  it  go?  We  can  say  that  the 
laborers  can  have  all  the  product  due  to  the  increase  of 
their  efficiency,  or  we  can  decide  that  in  addition  to 
this  they  shall  receive  a  part  of  the  product  due  to 
natural  advantages.  If  we  give  the  first  answer  the 
workmen  increase  their  wages  solely  through  adding 
to  their  efficiency  but  gain  nothing  from  the  advantages 
of  natural  resources,  nor  do  they  share  in  the  distribu- 
bution  of  the  billion  dollars'  worth  of  goods  coming 
from  them. 

Yet  this  is  the  answer  free-traders  give  when  they 


THE  ECONOMIC  BASIS  OF  PROTECTION.        (ft 

say  it  is  good  for  a  nation  to  have  a  low  cost  of  labor. 
The  cost  of  labor  in  the  more  productive  country  can- 
not be  as  low  as  in  the  other  country  unless  the  differ- 
ence in  the  efficiency  of  the  laborers  of  the  two  nations 
is  exactly  balanced  by  the  difference  in  their  wages. 
Under  these  conditions  the  workman  in  the  first  nation 
gets  his  increased  wages  entirely  from  his  greater  use- 
fulness injncreasing  the  product  of  industry,  but  from 
natural  advantages  he  gains  nothing.  Suppose  he  mi- 
grates to  the  less  productive  country.  His  greater 
efficiency  would  make  the  difference  between  his  wages 
and  that  of  the  inferior  workman  in  this  country  just 
as  great  as  if  he  remained  at  home.  If  his  wages  at 
home  were  double  that  of  the  workman  abroad,  an 
employer  in  the  less  fertile  country  could  afford  to 
give  him  double  the  usual  rate  of  wages  to  work  for 
him.  He  would  produce  twice  the  product  and  could 
receive  twice  the  wages  without  loss  to  his  employer. 
The  laborer,  then,  of  the  more  fertile  country  received 
just  the  wages  he  would  if  he  did  the  same  work  in 
the  less  fertile  country.  How,  then,  does  he  share  in 
the  natural  advantages  of  his  own  country  ?  If  a  man 
on  a  good  farm  does  a  half  more  work  and  gets  a  half 
more  pay  than  a  man  working  on  a  poorer  farm,  does 
he  get  any  advantage  from  the  more  fertile  land  upon 
■which  he  works  ?  How  much  advantage  from  a  good 
mine  does  a  miner  get  who  does  twenty  per  cent,  more 
work  and  gets  twenty  per  cent,  more  pay  than  does  a 
miner  working  in  a  poorer  mine?  His  wages  depend 
upon  his  efficiency  alone,  and  all  the  advantages  coming 
from  superior  natural  resources  pass  into  other  hands. 


68        THE  ECONOMIC  BASIS  OF  PROTECTION. 

When  free-traders  point  with  pride  to  the  low  cost 
of  English  labor,  what  does  it  mean  ?  Simply  this, 
that  the  workmen  of  England  are  willing  that  the 
classes  in  English  society  exempt  from  competition 
shall  possess  the  advantages  coming  from  the  su- 
perior natural  resources  of  England.  For  the  sake 
of  "  holding  their  own"  in  foreign  markets  the  laborers 
give  up  all  claim  to  the  results  of  home  advantages. 
The  coal  miners  get  no  more  than  the  same  efficiency 
would  give  them  in  the  poorer  mines  of  France  or  Ger- 
many. The  farm  hands  on  English  wheat  land  get 
three  times  the  wages  of  workmen  on  barren  steppes 
of  Russia  if  they  do  three  times  the  work,  but  not 
otherwise.  And  the  cotton-spinner  can  get  double  the 
wages  paid  in  Italian  mills  if  he  will  care  for  twice 
the  number  of  spindles. 

The  advantage  of  the  American  over  the  European 
laborer  consists  in  the  lower  value  of  raw  materials. 
Wages  form  a  larger  part  of  the  value  of  finished 
commodities  and  raw  material  a  smaller  part  than  is 
the  case  in  Europe.  This  fact  makes  the  cost  of 
American  labor  high,  but  it  enables  the  laborer  to 
share  in  the  benefits  coming  from  superior  natural 
resources. 

The  burden  that  oppresses  the  American  laborer 
comes  from  the  price  he  pays  for  the  articles  we  ex- 
port, for  those  we  import  free  of  duty,  and  for  city 
laud.  It  is  the  price  he  pays  for  bread  and  meat,  for 
tea  and  coffee,  and  for  house-rent  that  have  increased 
and  absorb  so  large  a  part  of  his  wages.  Cuban  sugar 
and  Brazilian  coffee  are  at  monopoly  prices,  and  not 


THE  ECONOMIC  BASIS  OF  PROTECTION.        ft  9 

Ohio  wool  or  Pennsylvania  iron.  Cotton,  woollen, 
silk,  steel,  and  other  protected  goods  are  sold  to 
laborers  at  a  lower  price  than  ever  before.  In  short, 
the  laborer,  as  well  as  other  consumers,  has  gained 
wherever  the  national  policy  has  been  active,  and  lost 
wherever  it  has  been  passive.  A  passive  reliance  ou 
free-trade  brings  high  prices;  an  active  preference  for 
home  production  brings  cheapness.  The  former  creates 
natural  monopolies ;  the  latter  breaks  them  down. 

The  plausibility  of  their  theory  of  the  cost  of  labor 
depends  upon  the  use  free-traders  make  of  two  fallacies. 
When  they  wish  to  show  that  the  natural  development 
of  industry  should  not  be  interfered  with  they  con- 
tend that  natural  advantages  determine  the  location 
of  each  industry,  and  that  its  productivity  will  be 
reduced  if  the  location  is  changed.  Can  oranges  and 
sugar,  they  ask,  be  produced  in  Wisconsin  and  wheat 
or  potatoes  in  Florida  without  a  loss  of  productive 
power?  On  the  other  hand,  when  the  attention  is 
directed  solely  to  the  distribution  of  wealth  they  assume 
that  all  the  productive  power  is  due  to  the  efficiency  of 
the  laborers.  How,  they  now  ask,  can  cheap  labor  injure 
American  workmen  when  the  efficiency  of  the  Ameri- 
can is  enough  greater  that  the  cost  of  his  labor  is  less 
than  the  cheaper  labor  of  the  less  efficient  foreigners. 
Certainly  there  is  no  injury  if  the  wages  of  the  Ameri- 
can depends  entirely  upon  his  efficiency,  but  if  a  part 
of  his  wages  comes  from  the  use  of  superior  resources, 
this  part  may  be  lost  by  foreign  competition. 

In  this  way,  by  claiming  that  natural  resources 
alone   determine   the   productivity   of  industry  when 


70        THE  ECONOMIC  BASIS  OF  PROTECTION. 

national  industry  is  viewed  from  a  collective  stand- 
point, and  then  asserting  that  the  productive  power 
depends  entirely  upon  the  efficiency  of  the  laborers 
when  the  distribution  of  the  proceeds  of  industry  is  in 
question,  free-traders  seem  to  have  the  best  of  both 
arguments.  The  fallacies  upon  which  they  rely  become 
manifest  only  when  the  effects  of  natural  resources  and 
the  efficiency  of  the  laborers  are  kept  in  view  in  dis- 
cussing both  the  production  and  the  distribution  of 
wealth.  Join  the  two  together  and  it  will  be  seen 
why  natural  resources  do  not  always  determine  the  most 
advantageous  production,  and  why  superior  laborers 
may  lose  through  competition  with  cheap  labor  even 
though  the  cost  of  their  labor  is  low. 

It  is  therefore  not  a  subsidy  to  laborers  in  a  fertile 
country  to  give  them  more  wages  than  the  difference 
between  their  efficiency  and  the  efficiency  of  laborers  in 
less  productive  countries.  They  have  a  just  claim 
upon  a  share  in  superior  natural  resources  and  this 
share  they  cannot  get  if  they  must  "  hold  their  own" 
with  foreigners  working  for  less  wages.  On  the  con- 
trary, it  is  free-trade  that  gives  a  subsidy  to  people  who 
do  not  deserve  it.  It  takes  the  increase  of  wealth  due 
to  fertile  fields  and  productive  mines  from  workmen  to 
whom  it  belongs,  and  gives  it  to  classes  who  have  some 
advantage  through  which  they  need  not  "  hold  their 
own"  with  less  favored  persons.  Cost  of  labor  cannot 
therefore  be  accepted  as  a  criterion  of  the  benefit  derived 
by  a  nation  from  its  industries  without  great  injury  to 
workmen  and  other  productive  classes  which  it  is  the 
nation's  duty  to  protect  and  foster. 


CHAPTER    VIII. 

THE   COST   OF   A   PASSIVE   POLICY. 

Thus  far  the  objective  conditions  fixing  the  rate  of 
wages  have  received  emphasis.  From  this  point  of 
view  wages  are  controlled  by  the  productivity  of  the 
natural  resources  which  men  utilize.  If  men  want 
wheat,  cotton,  or  coffee,  the  rate  of  wages  cannot  ex- 
ceed the  value  of  the  wheat,  cotton,  or  coffee  obtained 
from  the  poorest  land  in  use,  and  when  more  of  these 
articles  are  wanted  poorer  lands  are  tilled  and  less 
wages  given  to  the  workmen.  This  objective-point 
of  view,  however,  is  not  fundamental  and  at  best  gives 
an  approximation  to  the  actual  conditions  shaping  pro- 
duction in  a  static  nation.  The  direction  of  produc- 
tion is  determined  by  the  strength  of  human  wants, 
and  we  can  reach  ultimate  causes  only  by  showing  the 
harmony  of  a  doctrine  with  the  laws  of  consumption. 
I  shall  endeavor  therefore  to  establish  the  law  of 
wages  I  have  presented  by  showing  its  accord  with  the 
new  theory  of  value  based  upon  the  differences  in  the 
intensity  of  our  wants.  We  gratify  our  most  intense 
wants  first,  and  after  they  are  supplied  we  then  devote 
our  energies  to  the  production  of  those  things  for  which 
our  wants  are  less  urgent.  Additional  quantities  of 
the  same  article  also  have  very  different  utilities  to  us. 
A  single  roll  for  breakfast  gives  much  pleasure  ;  from  a 

71 


72        THE  ECONOMIC  BASIS  OF  PROTECTION. 

second  we  would  derive  less  pleasure,  and  each  suc- 
ceeding roll  would  give  us  still  less  pleasure,  until  at 
last  no  more  pleasure  could  be  derived  from  eating. 

Having  shown  the  gradation  of  our  wants,  I  shall 
show  the  connection  between  the  intensity  of  our  wants 
and  the  value  the  articles  supplying  them  will  have. 
The  first  roll,  for  example,  would  have  a  great  value, 
because  we  would  be  deprived  of  a  great  pleasure  if 
we  did  not  have  the  roll ;  as  we  obtain  less  pleasure 
from  the  second  roll,  its  value  will  be  diminished,  and 
the  price  of  the  two  rolls  cannot  be  more  than  double 
the  value  of  the  second  roll  to  us.  When  the  third 
roll  is  consumed,  as  the  pleasure  we  derive  from  it  is 
still  less,  its  value  will  also  be  less,  and  hence  if  we 
are  supplied  with  three  rolls  the  value  of  each  of  them 
will  be  lower  than  if  we  had  but  two. 

I  wish  to  emphasize  the  fact  that  the  value  of  any 
article  cannot  exceed  the  value  which  the  least  useful 
portion  of  the  supply  of  that  article  has  to  us.  If  we 
are  well  supplied  with  meat,  it  will  have  a  lower  value 
than  if  we  had  but  a  small  quantity  to  consume.  For 
this  reason  the  more  completely  our  wants  are  supplied 
the  lower  will  be  the  value  to  us  of  the  articles  supply- 
ing these  wants. 

Let  us  apply  this  thought  to  the  conditions  determin- 
ing the  rate  of  wages.  So  long  as  our  wants  are  very 
incompletely  supplied  the  value  of  labor  to  us  will  be 
very  great,  because  the  wants  that  labor  can  supply  are 
intense.  As  our  wants  become  more  fully  satisfied 
labor  will  have  a  less  value  to  us,  because  the  articles 
which  additional  labor  can  supply  us  satisfy  wants  that 


THE  ECONOMIC  BASIS  OF  PROTECTION.        73 

are  less  urgent.  In  the  same  way  that  value  cannot 
exceed  the  pleasure  we  derive  from  that  portion  of  an 
article  least  useful  to  us,  so  wages  cannot  exceed  the 
value  of  the  least  useful  goods  that  labor  is  employed 
in  producing. 

To  illustrate,  let  us  suppose  that  the  labor  of  a  com- 
munity was  engaged  in  producing  four  articles,  two 
hours'  work  in  one  of  which  will  give  eight  units  of 
pleasure ;  in  the  second,  seven  units  ;  in  the  third,  six 
units;  in  the  fourth,  five  units.  If  eight  hours  is  a 
day's  work,  then  four  laborers,  each  making  one  of 
these  articles,  would  in  all  produce  one  hundred  and 
four  units  of  pleasure,  and  each  laborer's  share,  if  the 
division  were  equal,  would  be  twenty-six  units  a  day. 
This  equal  distribution  could  not  take  place.  If  A 
is  making  the  article  that  gives  eight  units  of  pleasure, 
he  will  produce  in  a  day  an  equivalent  of  thirty-two 
units  of  pleasure ;  B,  who  produces  the  article  giving 
seven  units  of  pleasure,  will  produce  twenty-eight 
units ;  C,  making  the  article  giving  six  units  of  pleas- 
ure, will  produce  twenty-four  units;  while  D,  making 
the  article  giving  five  units  of  pleasure,  will  produce 
but  twenty  units  of  pleasure  in  a  day.  What  now 
must  be  the  rate  of  wages  ?  If  competition  is  open  the 
rate  of  wages  cannot  exceed  twenty  units  of  pleasure 
per  day,  because  this  is  the  value  of  the  articles  to  con- 
sumers which  J)  produces  in  a  day,  and  they  will  go 
without  them  rather  than  pay  more.  If  D  gets  but 
the  equivalent  of  twenty  units  of  pleasure  a  day,  A, 
B,  and  C  cannot  obtain  more,  because  competition  will 
take  from  them  all  the  value  of  their  articles  above 
d  7 


74        THE  ECONOMIC  BASIS  OF  PROTECTION. 

that  produced  by  D.  The  rate  of  wages,  therefore, 
will  be  the  equivalent  of  twenty  units  of  pleasure  a 
day,  although  the  value  of  the  average  labor  of  the 
four  laborers  will  be  twenty-six  units.  They  will 
only  obtain  the  equivalent  of  eighty  units  of  pleasure, 
and  some  one  else  will  get  the  benefit  of  the  remaining 
twenty-four  units  of  pleasure  which  comes  from  con- 
suming the  articles  the  laborers  make. 

The  result,  of  course,  would  be  different  if  each  man 
worked  for  himself  and  supplied  all  his  own  wants  in- 
stead of  making  exchanges  with  his  neighbors.  If 
each  of  the  laborers  worked  two  hours  producing  the 
first  article,  then  gave  two  hours  to  the  second,  then 
two  hours  to  the  third  and  two  to  the  fourth,  they 
might  obtain  for  themselves  an  equivalent  of  one  hun- 
dred and  four  units  of  pleasure,  which  is  all  their 
labor  has  created.  When,  however,  labor  is  divided, 
each  man  devotes  his  attention  to  the  production  of 
some  one  article.  One  laborer  is  producing  an  article 
upon  which  the  community  places  a  high  value,  a 
second  devotes  his  energies  to  producing  an  article  re- 
garded as  less  useful,  while  some  of  the  laborers  are  at 
work  upon  articles  which  the  community  do  not  esteem 
very  highly.  With  such  a  division  of  labor  the  rate  of 
wages  must  be  so  low  that  it  will  not  exceed  the  value, 
to  the  community,  of  the  day's  work  supplying  the 
least  urgent  want  the  community  are  gratifying.  Some 
of  the  laborers  get  their  wages  entirely  from  the  value 
of  articles  supplying  these  least  urgent  wants,  and  all 
the  other  laborers  through  competition  will  have  their 
wages   reduced   to  a   level  with   their  less   fortunate 


THE  ECONOMIC  BASIS  OF  PROTECTION.        75 

fellows  who  supply  the  least  urgent  wants.  Wages, 
therefore,  must  fall  when  the  community  can  get  com- 
modities satisfying  less  urgent  wants,  and  whatever 
forces  a  part  of  the  laborers  into  occupations  supplying 
less  urgent  wants  will  lead  to  a  reduction  in  the  Mages 
of  all  laborers. 

These  facts,  it  seems  sto  me,  furnish  an  excellent  ex- 
planation of  the  theory  of  over-production  to  which  so 
much  attention  has  been  given  and  for  which  so  many 
explanations  have  been  furnished.  Every  great  in- 
vention leads  to  a  displacement  of  laborers.  There  is  so 
great  an  economy  of  labor  introduced  into  the  produc- 
tion of  many  articles  through  machinery  and  other 
improvements,  that  only  a  part  of  the  former  laborers 
can  be  employed  in  the  old  industries.  Some  of  the 
men  must  seek  employment  in  new  occupations.  They 
must  supply  new  wants  which  thus  far  have  not  been 
gratified  by  consumers.  These  new  wants,  however, 
are  less  urgent  wants  than  those  now  supplied,  and 
hence  the  value  to  consumers  of  the  articles  supplying 
them  is  less  than  the  value  of  articles  supplying  the 
more  intense  wants.  The  value  of  the  articles  supply- 
ing these  new  wants  being  less,  the  wages  of  those  who 
produce  them  must  be  lower  than  their  wages  would  be 
if  they  were  engaged  in  the  old  occupations,  and  the 
wages  of  all  other  competing  laborers  will  be  reduced 
to  the  value  of  a  day's  labor  in  the  articles  supplied 
by  the  new  industries.  In  this  way  a  series  of  im- 
provements leads  to  a  fall  of  prices  and  hard  times. 
There  is  a  transference  of  the  benefits  of  the  improve- 
ments to  the  classes  exempt  from  competition.  Although 


76        THE   ECONOMIC  BASIS  OF  PROTECTION. 

the  average  return  for  labor  has  been  increased  by  the 
improvements,  yet  the  rate  of  wages  has  been  lowered, 
thus  giving  a  double  gain  to  those  not  competing  on 
equal  terms  with  their  fellows.  Just  as  the  occupation 
of  poorer  land. raises  rent  and  lowers  wages,  so  will  the 
transference  of  laborers  to  occupations  supplying  less 
urgent  wants  increase  the  advantages  of  the  privileged 
classes  and  lower  the  rate  of  wages.  Even  if  new 
wheat  lands  are  as  productive  as  the  old  land,  the 
wages  of  its  producers  will  be  reduced  if  the  additional 
wheat  supplies  the  desire  of  consumers  for  bread  more 
fully  than  before. 

Improved  production  results  not  merely  in  an  in- 
creased production  of  the  cheapened  articles ;  it  also 
leads  to  a  varied  production,  through  which  the  com- 
munity has  some  of  its  less  intense  wants  gratified. 
The  consumption  of  cloth  does  not  increase  proportion- 
ately with  the  reduction  of  its  cost,  and  hence  a  part 
of  the  laborers  must  be  transferred  to  occupations  sup- 
plying less  urgent  wants  where  the  value  of  their  labor 
will  be  less  than  formerly.  Suppose,  as  an  illustration, 
the  rate  of  wages  in  the  old  occupations  was  a  dollar,  and 
the  value  of  the  product  of  a  day's  work  in  the  new 
occupations  ninety  cents.  Suppose,  further,  there  was 
an  increase  in  the  productive  power  in  the  old  occupa- 
tions of  twenty  per  cent.,  and  that  the  increased  de- 
mand for  these  articles  through  the  reduction  in  their 
cost  was  enough  to  employ  one-half  of  the  laborers 
who  were  displaced.  Nine-tenths  of  the  laborers  would 
now  produce  eight  per  cent,  more  than  all  of  them  did 
before    the    improvement    in    production.      It    would 


THE  ECONOMIC  BASIS  OF  PROTECTION.        77 

seem,  therefore,  that  an  increase  in  the  rate  of  wages 
would  take  place.  But  this  is  not  possible,  for  one- 
tenth  of  the  laborers  are  not  employed,  and  they  must 
seek  employment  in  the  new  occupations  where  the 
value  of  the  product  of  a  day's  work  does  not  exceed 
ninety  cents.  So  long  as  one-tenth  of  the  laborers 
must  work  for  ninety  cents  a  day,  the  other  nine- 
tenths,  instead  of  getting  the  increase  of  wages  that 
might  otherwise  come  to  them  through  the  increase  of 
productive  power,  will  also  through  competition  find 
their  wages  reduced  to  ninety  cents  a  day. 

In  this  way  improvements  at  first  tend  to  reduce 
rather  than  increase  the  value  of  a  day's  work.  There 
are  always  a  number  of  new  wants  not  quite  strong 
enough  to  make  the  pleasure  of  consumption  equal  to 
the  cost  of  supplying  the  want.  The  price  the  public 
desires  to  pay  is  not  sufficient  to  give  a  fair  rate 
of  wages.  From  the  increase  in  population,  and  also 
from  the  displacement  of  labor  through  improved  pro- 
duction, there  is  constantly  a  surplus  part  of  the  laboring 
class  which  must  seek  employment  in  supplying  these 
new  wants.  The  only  question  is,  Shall  we  aid  or  re- 
tard this  movement  of  laborers  into  new  occupations  ? 
So  long  as  they  are  not  encouraged  by  the  state,  the 
wages  in  these  industries  must  for  a  time  at  least  be 
very  small.  There  are  so  many  expenses  connected 
with  the  opening  up  of  a  new  industry  that  the  wages 
obtained  from  it  must  for  a  long  time  be  much  below 
the  level  of  other  industries.  In  all  these  same  ways 
a  relatively  larger  proportion  of  the  whole  labor  of  the 
community  must  go,   and   however  much  the  produc- 

7* 


78        THE  ECONOMIC  BASIS  OF  PROTECTION. 

tiveness  of  American  industry  is  increased  through 
improvements,  there  will  be  a  tendency  towards  a 
lower  rate  of  wages  so  long  as  a  part  of  the  laborers 
are  forced  into  these  new  occupations,  where,  for  a 
time  at  least,  their  remuneration  will  be  small. 

The  readjustment  of  our  wants  to  our  present  eco- 
nomic conditions  will  in  the  end  straighten  out  thie 
difficulty,  but  until  then  wages  must  be  relatively  low, 
and  a  large  part  of  the  proceeds  of  industry  will  pass 
into  the  hands  of  those  freed  in  some  way  from  the 
depressing  effects  of  competition.  Wages  can  be  re- 
stored to  their  former  level  or  forced  above  it  only  by 
the  increased  urgency  of  these  new  wants,  but  this 
change  cannot  take  place  until  the  consumption  of  the 
new  articles  becomes  habitual.  In  time  the  new 
wants  will  become  of  equal  urgency  with  those  now 
supplied,  and  only  then  will  the  injurious  effects  upon 
the  laborers  be  removed.  So  long,  however,  as  the 
national  policy  is  passive  and  nothing  is  done  to  aid 
the  transference  of  laborers  to  new  occupations,  the 
course  of  prices  and  of  wages  will  be  as  I  have  indi- 
cated. The  cost  of  the  passive  policy  to  the  people  is 
measured  by  the  loss  of  labor  and  capital  during  this 
period  of  transition,  while  there  is  a  great  difference  in 
the  urgency  of  the  various  wants  which  are  gratified 
by  the  articles  produced  by  laborers.  A  passive  policy 
prevents  an  increase  in  the  opportunities  for  labor  as 
compared  with  population  and  is  thus  the  cause  of  the 
crushing  effects  of  competition.  There  is  only  a  small 
surplus  of  laborers  without  remunerative  occupation,  but 
these  few  have  a  depressing  effect  upon  wages.     Change 


THE  ECONOMIC  BASIS  OF  PROTECTION.        79 

the  relation  of  population  to  opportunities  for  labor  and 
wages  will  rise  rapidly,  and  those  natural  monopolies 
which  result  from  a  passive  policy  and  from  the 
increase  in  the  pressure  of  population  will  lose  their 
value. 

To  shorten  the  hours  for  labor  so  that  the  whole 
laboring  population  could  be  employed  in  the  old  occu- 
pations might  prevent  a  fall  in  wages,  but  it  would 
also  prevent  the  growth  of  the  new  wants.  They  can- 
not increase  in  strength  until  they  are  regularly  sup- 
plied, and  in  this  way  shorter  hours  would  delay  the 
ultimate  remedy,  through  which  alone  there  can  be  a 
permanent  solution  of  our  labor  difficulties.  A  better 
solution  of  this  difficulty  would  come  through  the 
cheapening  of  the  articles  gratifying  the  new  wants  at 
the  expense  of  the  old  stable  wants  which  have  now 
a  high  value  to  the  public.  An  active  policy  must 
always  in  some  way  further  this  solution,  and  thus 
make  the  whole  society  bear  its  share  of  the  burden 
coming  from  the  transference  of  laborers  to  new  occu- 
pations. A  national  policy  is  not  efficient  unless  it 
furnishes  conditions  through  which  opportunities  for 
labor  will  increase  as  rapidly  as  population  increases. 
A  passive  policy,  on  the  contrary,  throws  the  whole 
burden  of  the  readjustment  of  society  to  new  conditions 
upon  the  laboring  classes.  More  than  this,  it  makes 
the  burden  many  times  as  great  as  it  might  be,  since 
probably  not  more  than  one-tenth  of  the  laborers  are 
seeking  employment  in  the  new  occupations  whose  prod- 
ucts are  not  as  yet  valued  highly  enough  by  the 
public  to  pay  fair  wages.     Free-trade  would   have  a 


80        THE  ECONOMIC  BASIS  OF  PROTECTION. 

very  detrimental  effect  upon  this  readjustment  to  new 
conditions,  because  it  would  force  us  to  wait  until 
Europe,  as  well  as  America,  changes  its  consumption 
in  a  way  that  will  allow  all  the  laborers  to  find  a  profit- 
able employment.  As  a  consequence  the  length  of  the 
period  of  transition  to  new  forms  of  consumption  is 
greatly  extended  and  its  burden  to  the  laboring  classes 
increased.  In  so  far  as  we  have  reason  to  believe 
that  American  society  is  in  a  more  dynamic  condition 
than  that  of  Europe,  and  that  it  will  by  itself  move 
along  more  rapidly  in  the  only  way  that  can  lead  to  an 
adjustment  of  opportunities  for  labor  to  population, 
just  so  far  do  our  interests  demand  that  we  isolate  our- 
selves from  European  conditions  as  much  as  possible, 
in  order  that  our  society  can  adjust  itself  to  the  new 
conditions  more  rapidly  than  it  could  if  we  were  in 
close  commercial  relations  with  the  more  static  nations 
of  Europe. 


CHAPTER     IX.     . 

WHERE    FOREIGN   COMMERCE    IS    A    NATIONAL    LOSS. 

Among  the  various  countries  there  is  a  great  variety 
of  natural  advantages.  The  soil,  climate,  geographical 
position,  and  mineral  resources  of  no  two  countries  are 
the  same.  This  country  has  advantages  for  the  produc- 
tion of  grapes  and  oranges,  but  no  coal.  The  second 
has  good  wheat  land,  but  is  inferior  for  fruit.  The 
third  is  adapted  for  corn  and  tobacco,  but  not  for  sugar 
or  rice.  Besides  these  physical  differences  there  have 
developed  among  the  inhabitants  of  these  countries  a 
diversity  of  tastes,  habits,  and  intelligence  which  give 
them  aptitudes  or  inclinations  for  different  occupations. 
Upon  these  differences  in  nature  and  men,  whether 
original  or  acquired,  all  foreign  trade  depends.  Were 
it  not  for  them  we  would  build  no  lona;  railroads,  dig 
no  ship-canals,  nor  have  our  seas  covered  with  a  fleet  of 
ships  sailing  to  and  from  every  part  of  the  world. 

This  commerce  may  be  divided  into  three  classes,  ac- 
cording to  the  causes  which  make  the  trade  profitable. 
First,  there  are  exchanges  which  take  place  between 
nations  with  such  differences  of  soil  and  climate  that 
the  products  of  the  one  either  cannot  be  grown  in  the 
other,  or,  at  least,  would  be  grown  under  such  natural 
disadvantages  that  the  same  labor  would  be  much  less 
productive,  while  in  its  own  products  the  second  coun- 
try lias  a  like  advantage  over  the  first.  England,  for 
/  81 


82        THE  ECONOMIC  BASIS  OF  PROTECTION. 

example,  is  a  better  wheat  country  than  Cuba,  while 
Cuba  can  produce  sugar  at  a  much  less  cost  in  labor 
than  England.  If  trade  between  them  should  cease 
both  countries  would  have  to  expend  more  labor  to  get 
the  same  quantity  of  wheat  and  sugar.  To  shut  off 
this  exchange  of  products  would  be  a  waste  of  labor  for 
which  there  could  be  no  compensation. 

In  a  second  kind  of  trade  the  advantage  is  merely 
relative.  Suppose  a  week's  work  in  Cuba  would  give 
sixty  pounds  of  sugar  or  fifteen  pounds  of  coffee,  while 
in  Brazil  the  same  work  would  produce  seventy-five 
pounds  of  sugar  or  twenty-five  pounds  of  coffee.  In 
this  case  Brazil  has  an  advantage  in  raising  both  sugar 
and  coffee,  yet,  if  commerce  were  free  there  would 
spring  up  between  them  a  trade  in  these  articles. 
Brazil  has  an  advantage  in  the  production  of  both  arti- 
cles and  a  relative  advantage  in  the  production  of 
coffee,  while  Cuba  is  at  a  disadvantage  in  the  produc- 
tion of  both  articles  yet  has  a  relative  advantage  in  the 
production  of  sugar.  A  pound  of  coffee  in  Brazil 
would  buy  only  three  pounds  of  sugar,  while  if  taken 
to  Cuba  it  would  buy  four  pounds.  A  trade  profitable 
to  dealers  would  thus  spring  up,  growing  out  of  the 
relative  cost  of  the  two  articles.  In  case  the  commerce 
should  be  shut  off,  would  both  nations  suffer  per- 
manently, or  could  they  adjust  themselves  to  their  new 
situation  in  a  way  to  compensate  for  the  decrease  of 
foreign  trade?     This  is  a  matter  of  dispute. 

A  third  class  of  exchange  arises  from  differences  in 
the  inhabitants  of  various  parts  of  the  world.  The 
skill,  strength,  and  intelligence  of  the  workmen  in  one 


THE  ECONOMIC  BASIS  OF  PROTECTION.        83 

country  differ  greatly  from  those  of  any  other,  through 
which  their  inclination  or  ability  to  do  work  of  a  given 
kind  is  very  marked.  Each  nation  has  through  his- 
torical conditions  or  natural  advantages  acquired  a 
knack  to  do  a  few  kinds  of  manual  labor  with  more 
efficiency  than  the  laborers  of  other  countries  can  do  it. 
In  this  way  China  has  become  noted  as  a  producer  of 
tea,  Italy  of  silk,  France  of  wine,  Portugal  of  fruit, 
and  England  of  iron  and  cotton  goods.  Out  of  these 
conditions  a  trade  springs  up  between  the  various  na- 
tions caused  by  the  relative  advantages  they  have  for 
the  particular  articles  in  which  their  workmen  are  most 
efficient.  In  the  case  of  this  commerce  also  the  ques- 
tion is  asked,  Would  the  nations  suffer  an  irreparable 
loss  if  the  trade  should  cease?  Here  again  the  answer 
is  a  matter  of  dispute.- 

The  central  point,  then,  in  the  discussion  about 
foreign  commerce  lies  in  the  utilization  which  a  nation 
should  make  of  its  relative  advantages  over  other 
nations.  The  free-traders  contend  that  trade  based 
upon  the  relative  advantages  of  different  nations  is  al- 
ways valuable  and  leads  to  the  national  prosperity  of 
both  nations.  A.  protectionist  would  discourage  these 
exchanges  and  encourage  home  production,  thinking 
that  national  prosperity  can  be  realized  only  by  the  best 
use  of  all  national  resources  coupled  with  the  fullest 
development  of  the  industrial  qualities  of  the  people. 

The  chain  of  reasoning  used  by  the  free-trader  is  a 
simple  one.  Exchanges  based  upon  relative  advantage 
are  a  source  of  profit  to  the  individuals  engaged  in  the 
trade,  and  what  is  a  good  policy  for  individuals  cannot 


84        THE   ECONOMIC  BASIS  OF  PROTECTION. 

be  a  bad  policy  for  the  state.  The  reasoning  on  the 
other  side  is  longer  and  less  direct,  yet  it  reaches  the 
root  of  the  matter.  National  prosperity  is  a  much 
larger  and  more  complicated  problem  than  that  of  the 
individuals  who  form  the  nation  at  any  given  time. 
The  nation  is  not  merely  a  group  of  units  whose  pros- 
perity can  be  determined  by  observing  contemporary 
facts.  National  prosperity  depends  upon  the  natural 
laws  regulating  the  supply  of  raw  material  and  upon 
the  industrial  possibilities  of  the  people.  A  progressive 
nation  must  see  not  merely  that  its  present  inhabitants 
have  a  profitable  trade,  but  that  the  latent  qualities  in 
men  and  land  are  gradually  drawn  out.  The  effect  of  for- 
eign trade  in  bringing  the  nation  prematurely  into  a  static 
state  also  demands  investigation,  since  the  endeavor 
to  keep  the  people  dynamic  is  as  much  an  element 
of  a  good  national  policy  as  is  their  present  prosperity. 
From  this,  point  of  view  a  prominent  error  of  free- 
traders results  from  their  lack  of  knowledge  of  the 
conditions  of  agricultural  prosperity.  They  always 
talk  of  some  one  use  of  each  tract  of  land  as  though 
it  were  a  machine  made  for  a  particular  purpose.  This 
tract  they  regard  as  good  wheat  land,  that  as  good  for 
pasture;  another  is  good  for  corn,  while  the  next  is 
good  for  rice,  and  the  fifth  for  sugar.  This  method  of 
reasoning  about  land  was  introduced  by  Ricardo  in  all 
his  discussions  and  has  been  accepted  by  his  free-trade 
followers.  Yet  in  reality  this  conception  of  land  is  as 
abstract  and  far  more  false  than  that  of  his  economic 
man,  which  the  later  development  of  economic  science 
has  discarded.     The  conception  of  good  wheat  land  or 


THE  ECONOMIC  BASIS  OF  PROTECTION.        85 

of  any  other  land  suited  to  some  single  use  must  be 
displaced  by  a  better  one  before  an  intelligent  discus- 
sion of  land  problems  is  possible.  The  true  concep- 
tion of  land  is  that  of  a  productive  instrument  suited 
for  a  group  of  crops.  Any  laud  is  poor  land  for  one 
crop.  It  becomes  better  land  through  an  increase  in 
the  variety  of  its  products,  and  is  superior  land  only 
when  a  suitable  rotation  of  crops  brings  out  all  its 
qualities.  The  course  of  foreign  trade  may  make  the 
use  of  land  for  a  single  crop  more  profitable  for  a  time, 
yet  the  gain  to  the  owner  is  at  the  expense  of  the  pro- 
ductive qualities  of  the  land.  Free-trade  thus  prevents 
a  well-balanced  development  of  the  group  of  indus- 
tries which  will  make  the  most  of  the  land. 

Suppose  that  of  two  nations  similarly  situated  in  re- 
lation to  the  world's  market  the  one  allows  land-owners 
to  follow  the  line  of  greatest  present  profit  and  put  the 
land  to  some  one  use  for  which  the  relative  advantage 
is  greatest,  while  the  other  discourages  any  trade  which 
prevents  the  use  of  the  land  for  all  crops  for  which  it 
is  especially  fitted.  The  land  of  the  first  nation  would 
gradually  become  exhausted  through  continued  cultiva- 
tion of  one  crop,  while  that  of  the  second  would  be- 
come better  land  through  the  development  of  its  latent 
qualities  by  a  suitable  rotation  of  crops.  Is  it  not 
plain  that  the  second  nation  would  have  the  greater 
population  and  wealth  at  the  end  of  a  given  period? 

We  cannot  in  this  way,  however,  measure  the  full 
value  of  the  advantage  of  the  second  nation.  Within 
a  given  area  where  a  given  crop  has  a  relative  advan- 
tage much  of  the  land  will   not  be  suited  for  this  crop. 

8 


$Q        THE  ECONOMIC  BASIS  OF  PROTECTION. 

While  Illinois  was  used  merely  for  wheat,  from  a 
fourth  to  a  half  of  each  field  was  not  tilled  because  it 
was  not  suited  to  wheat.  The  cultivated  area  of  the 
State  thus  formed  but  a  fraction  of  the  whole  area  ; 
while  at  a  later  period,  when  corn  and  grass  became 
leading  crops,  a  large  part  of  this  unused  land  became 
the  best  land.  There  was  a  revolution  in  the  estima- 
tion of  land  throughout  the  whole  State,  by  which 
the  better  land  from  the  old  point  of  view  became 
the  poorer  from  the  new.  In  this  way  the  use  of  the 
land  for  purposes  for  which  it  is  at  a  relative  disad- 
vantage not  only  makes  all  the  land  better  than  if  used 
for  any  one  crop  for  which  it  has  a  relative  advantage, 
but  also  greatly  increases  the  area  of  cultivated  land. 

Again,  the  relative  advantage  of  a  crop  depends  upon 
the  distance  of  land  from  market.  The  farther  the  land 
is  from  market  the  greater  the  relative  advantage  of 
wheat  or  other  crops  easy  to  transport.  A  home  mar- 
ket increases  the  advantage  of  bulky  crops  like  coru 
and  grass.  It  is  impossible  to  tell  what  crop  has  the 
relative  advantage  until  the  distance  from  market  is 
known.  Taking  Illinois  again  for  an  example  :  so 
long  as  England  was  the  only  market,  wheat  was  the 
sole  crop.  As  soon,  however,  as  the  growth  of  American 
cities  and  the  opening  up  of  railroads  gave  a  home 
market  for  corn  and  grass  products,  wheat  immediately 
ceased  to  be  grown  in  Northern  Illinois.  Even  the 
farmers  now  buy  it  as  regularly  as  they  do  their  sugar 
or  coffee.  Why  ?  Not  because  England  does  not  still 
want  wheat,  but  because  local  markets*  allow  the  land 
to  be  used  for  what  it  is  better  fitted. 


THE  ECONOMIC  BASIS  OF  PROTECTION.        87 

Free-traders  forget  that  the  prosperity  of  this  coun- 
try depends  upon  corn  and  grass,  for  which  the  market 
is  local,  and  not  upon  wheat  and  cotton,  which  have 
the  relative  advantage  in  foreign  trade.  The  North 
would  be  as  poor  as  the  South  and  its  cities  -as  small  if 
the  land  of  the  North  were  used  for  wheat  as  that  of 
the  South  is  used  for  cotton.  Had  our  whole  nation 
followed  the  lines  of  relative  advantage  advocated  by 
free-traders,  our  country  would  be  divided  into  three 
parallel  belts,  used  for  cotton,  tobacco,  and  wheat. 
The  two  sections  fitted  for  cotton  and  tobacco,  by  fol- 
lowing this  policy,  are  poor  and  under-populated.  The 
third  section,  by  following  the  lines  of  absolute  advan- 
tage more  closely,  has  kept  the  nation  prosperous  and 
made  it  populous  and  wealthy. 

It  is  the  use  of  all  absolute  advantages  that  has 
made  other  nations  prosperous,  and  England  forms  no 
exception  to  the  rule.  England  has  a  relative  advan- 
tage in  her  coal  fields,  while  Sweden  and  Spain  have 
the  same  advantage  in  their  iron  beds.  But  did  Eng- 
land ever  advocate  the  closing  of  her  iron  mines  so 
as  to  gain  the  relative  advantage  she  could  get  by  ex- 
changing her  coal  with  the  iron  ore  of  other  nations  ? 
She  also  has  a  greater  advantage  in  the  production  of 
cotton  goods  than  of  woollens  ;  yet  which  of  her  states- 
men has  wished  her  woollen-mills  to  close,  believing 
that  the  increased  gains  from  her  cotton-mills  would 
more  than  counterbalance  the  loss  from  woollen-mills? 

Peculiar  advantages  in  one  article,  instead  of  being 
the  cause  of  national  property,  as  free-traders  would 
have  us  believe,  are  usually  a  hinderance  to  progress. 


88        THE  ECONOMIC  BASIS  OF  PROTECTION. 

The  inhabitants  of  a  country  confining  their  energies 
to  the  utilization  of  some  one  advantage  neglect  other 
industries  to  a  degree  that  they  would  not  do  if  the  ad- 
vantages of  several  industries  were  about  equal.  The 
effects  of  cotton  cultivation  in  the  South  is  a  good  ex- 
ample of  the  national  detriment  which  flows  from  too 
great  an  advantage  of  one  crop.  Had  wheat  in  the 
North  the  same  advantage  that  cotton  has  in  the  South 
the  development  of  the  North  would  have  been  greatly 
retarded  if  not  prevented.  Fortunately  for  the  nation 
Western  lands  were  really  poor  wheat  lands,  so  that 
the  relative  advantage  for  wheat  in  foreign  markets 
was  to  a  large  degree  counterbalanced  by  the  superior 
productivity  of  the  land  for  corn  and  grass.  As  a  re- 
sult even  a  moderate  tariff  changed  the  advantage  from 
wheat  to  corn  and  grass,  and  thus  promoted  a  natural 
development  in  the  West.  The  advantages  of  cotton 
in  the  South  and  tobacco  in  Virginia  were  so  great 
that  this  tariff  could  not  place  on  equal  footing  other 
crops  not  needed  for  Europe,  and  as  a  result  the  one 
crop  of  each  section  wore  out  the  laud  and  kept  the 
people  in  poverty. 

The  same  fact  shows  itself  in  other  countries.  Cuba 
would  be  more  prosperous  if  she  were  less  fertile  for 
sugar,  for  then  Spanish  misrule  would  not  be  possible. 
Coffee  has  not  made  Brazil  or  Java  rich  and  prosperous 
countries.  If  a  blight  upon  the  grape-vine  should 
force  the  people  of  Portugal  to  use  their  land  for  a 
variety  of  uses  for  which  it  is  well  fitted,  the  loss  of 
relative  advantage  in  grape  cultivation  would  be  a 
national  gain.     And  the  history  of  England  bears  tes- 


THE  ECONOMIC  BASIS  OF  PROTECTION.        89 

tiraony  to  the  same  truth.  At  an  early  period  the 
sheep  industry  paid  so  well  that  the  quantity  of  culti- 
vated laud  and  the  demand  for  labor  were  greatly  re- 
duced, thus  checking  the  progress  of  the  nation.  The 
increased  number  of  sheep  did  not  come  from  any 
especial  advantage  of  the  sheep  industry  in  England. 
It  was  Continental  disorder  that  prevented  the  keeping 
of  sheep  elsewhere.  Thus  the  fact  that  England  was 
far  enough  in  advance  of  other  nations  to  protect  prop- 
erty in  country  districts  checked  the  growth  of  popula- 
tion and  wealth  by  giving  a  relative  advantage  to 
sheep-raising.  Its  people  suffered  solely  because  of  the 
relative  advantage  of  an  industry  which  could  employ 
but  a  fraction  of  the  whole  population.  The  advantage 
in  various  industries  which  might  have  been  secured  to 
England  through  its  internal  peace  was  lost  because  of 
the  relative  advantage  of  wool-growers. 

If  national  prosperity  cannot  come  from  the  use  of  a 
single  advantage,  still  less  can  it  be  secured  by  en- 
couraging a  trade  with  inferior  races  or  by  the  util- 
ization of  the  advantages  arisiug  from  contact  with 
inferior  men  at  home.  Put  men  of  superior  and  in- 
ferior ability  in  commercial  relations  and  exchanges 
will  take  place  which  would  not  occur  if  the  standard 
of  living  for  all  was  the  same.  The  skill,  intelli- 
gence, and  habits  of  each  race  and  individual  are  the 
results  of  social  environment.  An  individual  may 
not  be  to  blame  for  a  lack  of  superior  industrial 
qualities,  but  the  nation  of  which  he  is  a  part  is  re- 
sponsible. Every  industrial  quality  may  be  acquired 
if  the  nation  encourages  its  development.     There  are 


90        THE  ECONOMIC  BASIS  OF  PROTECTION. 

no  marks  to  distinguish  the  English  from  the  Italian 
workman  but  those  due  to  the  historical  development 
of  the  two  nations.  Place  the  Italian  nation  in  the 
social  environment  of  the  English  and  they  would  soon 
be  as  efficient.  No  progressive  nation  can  accept  any- 
industrial  deficiency  of  its  people  as  final.  Any  trade 
arising  out  of  such  a  deficiency  is  detrimental  to  the 
individual  as  well  as  to  the  nation. 

If  a  nation  can  find  no  compensation  at  home  for 
the  loss  of  foreign  commerce  based  upon  relative  ad- 
vantage, then  each  family  also  is  better  off  to  have 
poor  and  ignorant  neighbors  than  to  have  those  of 
equal  intelligence.  In  every  exchange  with  such 
neighbors  the  family  gets  as  great  a  relative  advantage 
as  the  nation  does  through  its  trade  with  less  intelligent 
foreigners.  Which  lawyer  has  the  greater  income,  he 
who  has  his  equals  as  clients,  or  he  who  works  for  his 
inferiors?  If  an  intelligent  physician  has  three  times 
the  efficiency  as  a  physician  and  twice  the  efficiency  as 
a  workman  as  those  about  him,  will  he  have  a  larger 
income  than  if  he  were  in  a  community  where  every 
man  had  his  intelligence?  The  more  intelligent  com- 
munity would  make  so  much  better  use  of  all  its  re- 
sources that  the  average  income  would  be  raised.  The 
physician  in  the  first  community  would  be  relatively 
better  off  than  his  less  fortunate  neighbor,  but  in  an 
absolute  sense  he  would  have  less  to  enjoy  than  if  he 
were  an  average  man  in  the  second  community.  A 
farmer  also  might  get  his  corn  more  cheaply  if  his 
neighbors,  using  a  poorer  system  of  cultivation  than  he 
does,  do  not  drain  their  land  or  raise  live-stock,  yet 


THE  ECONOMIC  BASIS  OF  PROTECTION.        91 

cheap  corn  could  not  compensate  for  what  he  suffers 
through  the  lack  of  intelligence  of  these  neighbors. 
Their  productive  power  would  be  so  small  that  popula- 
tion would  be  scattered,  and  many  of  the  advantages 
of  large  centres  of  trade  would  be  unavailable  to  him. 
He  would  also  be  deprived  of  good  roads,  schools,  and 
churches.  He  might  continue  better  off  than  his 
neighbors  and  yet  have  much  less  than  if  he  were  an 
ordinary  citizen  of  a  more  intelligent  community. 

The  advantage  we  get  from  neighbors  is  not  merely 
from  their  producing  certain  articles  more  cheaply  than 
we  can.  If  they  consume  what  we  consume  we  can 
buy  more  cheaply.  The  price  of  articles  is  reduced  by 
an  increase  of  demand,  as  well  as  by  cheaper  labor. 
We  make  a  gain  in  commerce  both  from  the  intelligent 
and  unintelligent;  but  the  gains  we  secure  from  the 
former  are  far  greater  than  those  derived  from  the 
latter.  In  dealing  with  the  latter  the  percentage  of 
profits  may  be  higher,  but  the  gross  profits  will  be  less. 

In  foreign  trade  the  same  simple  fticts  arc  decisive, 
although  its  evils  are  much  more  obscured  by  compli- 
cated conditions.  Americans  are  very  free  in  express- 
ing the  opinion  that  the  military  system  of  Germany 
reduces  its  productive  power  and  is  detrimental  to  the 
world's  progress,  yet  this  same  military  system  has 
given  to  its  people  those  characteristics  which  make  our 
present  trade  with  Germany  so  profitable.  We  must, 
then,  contradict  ourselves  by  saying  that  our  prosperity 
depends  upon  the  continuance  of  what  we  believe  to 
be  detrimental  to  Germany,  or  admit  that  the  present 
trade  with  Germany  could  diminish  or  even  cease  with- 


92        THE  ECONOMIC  BASIS  OF  PROTECTION. 

out  any  permanent  loss  to  ourselves.  And  the  same 
argument  applies  to  the  commerce  of  other  nations. 
Are  we  prepared  to  affirm  that  Italian  ignorance  and 
Turkish  oppression  are  advantageous  to  America?  If 
not,  then  we  must  admit  that  we  would  not  lose  if 
foreign  trade  based  upon  relative  advantage  were  cut 
off,  because  this  trade  is  of  its  present  nature  as  a  result 
of  the  ignorance  and  oppression  of  other  nations. 
Without  this  trade  we  would  develop  new  lines  of 
commerce  with  all  these  nations  where  the  advantage 
is  absolute  and  in  which  our  labor  as  well  as  theirs 
would  be  more  productive. 

Picture  for  a  moment  an  ideal  civilization  where  the 
best  use  is  made  of  all  the  land  and  where  all  the  in- 
dustrial qualities  of  its  inhabitants  are  fully  developed. 
The  distribution  of  the  population  would  not  be  de- 
termined by  historical  and  social  considerations,  but  by 
the  productive  qualities  of  land  and  of  natural  agents. 
If  one  region  was  more  fertile  than  another,  popula- 
tion would  adjust  itself  so  as  to  give  that  region  a 
population  proportional  to  its  productive  power.  Rela- 
tive advantage  would  be  no  longer  a  cause  of  ex- 
change, where  the  adjustment  of  population  to  natural 
advantages  is  complete. 

Suppose  such  a  society  be  brought  into  contact  with 
a  typical  nation  of  the  present  in  which  the  inhabitants 
have  a  defective  development  resulting  from  past  condi- 
tions, and  in  which  the  land  is  used  for  some  one  crop  for 
which  it  is  not  best  fitted,  what  would  be  the  result  in 
the  ideal  society  ?  Would  not  the  relative  cheapness  of 
the  few  articles  which  the  people  of  the  inferior  nation 


THE   ECONOMIC  BASIS  OF  PROTECTION.        93 

make  to  an  advantage  disturb  the  equilibrium  of  tlie 
ideal  society,  so  as  to  offer  a  premium  for  the  growth 
of  a  class  of  men  in  it  whose  industrial  qualities  were 
not  harmoniously  developed  ?  Would  not  also  the 
single  use  to  which  the  inferior  nation  puts  its  land 
disturb  the  values  of  agricultural  produce,  so  as  to  offer 
a  like  premium  for  using  of  the  land  of  the  ideal  na- 
tion in  a  way  detrimental  to  its  greatest  productivity? 
Most  assuredly  it  would.  Every  man  lacking  in  any 
industrial  quality  exerts  a  pressure  forcing  some  other 
man  into  a  one-sided  development,  so  that  his  industrial 
qualities  will  supplement  those  of  the  first.  Every 
field  used  for  some  one  crop  or  with  a  defective  rota- 
tion of  crops  exerts  a  like  pressure,  forcing  other  fields 
to  be  used  for  other  crops  more  frequently  than  is  in 
harmony  with  their  best  use.  The  productive  power 
of  every  nation  is  much  below  what  it  might  be  if  the 
disturbing  power  of  inferior  men  and  badly-cultivated 
land  were  removed.  The  chief  source  of  this  disturb- 
ing power  lies  in  the  endeavor  to  utilize  relative  ad- 
vantages in  foreign  trade.*  These  gains  are  of  the 
same  nature  of  land  exploitation  at  home.  The 
temporary  interest  of  a  few  is  given  more  considera- 
tion than  the  permanent  good  of  the  whole.  A  sound 
national  policy  must  cut  off  these  sources  of  profit  to 
individuals  and  make  it  for  their  interest  to  co-operate 
for  the  good  of  the  whole. 

*  "  The  produce  of  the  whole  world  would  be  greater  or  the 
labor  less  than  it  is  if  everything  were  produced  where  there  is 
the  greatest  absolute  facility  lor  its  production."— J.  S.  Mill, 
Book  III.,  C.  17,  Sec.  8. 


CHAPTER    X. 

OBSTACLES   TO   ECONOMIC   PROGRESS. 

To  determine  the  best  policy  for  a  nation  it  is 
necessary  to  examine  into  its  environment  and  see 
what  conditions  aid  and  what  obstacles  oppose  its 
growth.  Whether  or  not  an  individual  advocates  an 
active  or  passive  policy  on  the  part  of  the  nation  in 
reference  to  the  obstacles  which  stand  in  the  way  of 
economic  development,  depends  largely  upon  his  ideal 
of  economic  progress.  There  are  two  ideals  which 
stand  opposed  to  one  another,  and  every  writer,  either 
consciously  or  unconsciously,  adopts  one  of  them. 

In  the  first  place  there  is  the  static  conception  held 
by  all  the  consistent  advocates  of  a  passive  policy  on 
the  part  of  governments.  This  ideal  supposes  that  the 
best  opportunities  for  labor — that  is,  the  best  lands,  the 
best  mines,  and  other  resources — are  used  first,  and  that 
as  population  increases  poorer  natural  resources  must 
be  utilized  to  give  employment  to  the  additional  popu- 
lation. In  this  way  the  average  return  for  labor  is  re- 
duced, and  the  society  finds  itself  crowded  into  a 
narrower  economic  condition  with  every  increase  in 
population.  This  conception  might  be  well  compared 
to  an  isolated  lake  which  gradually  fills  up  with  every 
increase  in  the  quantity  of  water  put  into  it.  There 
94 


THE  ECONOMIC  BASIS  OF  PROTECTION.        95 

will  be  a  constant  rising  of  the  surface  but  without  any 
movement  of  the  water  in  any  direction. 

The  other  ideal  opposed  to  this  is  a  dynamic  one. 
It  supposes  that  the  individuals  of  a  society  are  con- 
stantly changing  with  their  environment,  that  they  have 
new  wants  arising  out  of  their  new  conditions,  and 
thus  there  are  continually  opening  up  to  them  new 
opportunities  for  labor  better  than  those  they  first  put 
into  use.  In  this  way  the  society  gradually  progresses 
out  of  a  poorer  economic  condition  into  a  better  one, 
and  a  gradual  increase  in  the  average  return  for  labor 
comes  with  every  change  in  the  economic  environ- 
ment. This  progress,  however,  is  not  regular.  A 
series  of  obstacles  hindering  economic  progress  must  be 
removed  one  by  one  in  order  that  society  can  develop 
in  an  orderly  manner.  As  a  society  presses  against  an 
obstacle  standing  in  the  way  of  its  progress,  the  phe- 
nomena, so  prominent  in  a  static  society,  appear  of  a 
gradual  diminution  in  the  average  return  for  labor  and 
a  more  unequal  distribution  of  wealth.  This  state  of 
affairs,  however,  increases  the  interest  of  society  in 
having  this  obstacle  removed,  and  finally  the  induce- 
ment becomes  so  great  that  the  obstacle  is  set  aside. 
Then  we  have  a  period  of  increased  prosperity  until 
some  new  economic  obstacle  is  reached,  and  then  the 
same  course  of  events  is  gone  through  again. 

This  ideal  of  social  progress  might  be  well  compared 
with  a  river  cutting  its  way  to  the  ocean  after  some 
geological  change  has  forced  it  to  take  a  new  course. 
The  water  flows  downward  into  a  basin,  which  gradu- 
ally fills  until  the  water  has  reached  the  height  on  the 


96         THE  ECONOMIC  BASIS   OF  PROTECTION. 

lower  side.  Then  a  channel  is  cut  through  this  obstacle 
and  the  level  of  the  water  is  lowered.  Passing  on, 
it  fills  the  next  basin  until  it  reaches  the  height 
enabling  it  to  cut  its  way  through  the  second  obstacle. 
Thus  the  progress  of  the  river  would  be  checked  by  a 
series  of  obstacles  retarding  its  progress  for  a  time,  but 
not  of  sufficient  strength  to  prevent  the  gradual  cutting 
of  the  course  of  the  river  through  all  that  opposed  it 
so  that  the  water  can  flow  into  the  ocean  beyond. 

In  presenting  this  conception  of  social  progress,  I 
want  to  bring  forward  more  clearly  the  economic  con- 
ditions which  make  many  obstacles  for  society  to  over- 
come and  retard  its  progress  in  a  somewhat  similar 
manner  to  that  of  the  river  I  have  just  described. 
Just  as  the  river  reaches  a  lower  level  after  breaking 
through  an  obstacle,  so  a  society  will  find  better  oppor- 
tunities for  labor  with  each  economic  obstacle  it  over- 
comes. The  poor  resources  it  first  used  will  be  aban- 
doned for  the  better  ones  it  finds  as  it  progresses. 

Americans  are  making  poor  use  of  their  country. 
We  are  not  using  our  land  for  that  for  which  it  is  best 
fitted,  nor  are  we  cultivating  it  in  a  way  that  will  make 
it  most  productive.  Our  material  resources  on  all  sides 
are  being  wasted  and  many  of  them  are  not  at  all  util- 
ized. Hence  it  cannot  be  said  that  we  have  begun  with 
our  best  resources,  and  that  our  development  will  be  in 
accordance  with  the  concept  of  social  progress  corre- 
sponding to  that  of  a  static  state  in  society.  "We  are,  I 
might  almost  say,  making  as  poor  a  use  as  we  can  of 
our  resources,  and  hence  the  possibility  lies  before  us 
of  making  great  progress  in  every  direction.     But  what 


THE  ECONOMIC  BASIS  OF  PROTECTION.        97 

stands  in  the  way  of  this  progress?  A  series  of 
obstacles  which  the  American  people  must  surmount 
one  by  one  as  they  advance  along  the  course  of  their 
civilization. 

I  think  no  one  will  deny  that  the  past  development 
of  the   American   people    has  been   the  gradual  sur- 
mounting of  a  series  of  obstacles.     The  soil,  when  first 
occupied,  required  immense  efforts  to  bring  it  into  a 
productive  condition,  and  when  it  was  made  productive 
there  were  serious  obstacles  to  overcome  in  opening  up 
roads  to  bring   this    produce  to  the   markets  of  the 
world.     When  these  agricultural  needs  were  satisfied 
then  arose  a  need  to  develop  the  manufacturing  interests 
of  the  country.     The  cotton  and  woollen  industries  in 
the  beginning  had  serious  obstacles  to  surmount  which 
for  a  long  time  retarded  their  successful  development. 
Then  came  the  period  in  which  the  obstacles  to  Ameri- 
can progress  lay  chiefly  in  the  cost  of  transportation 
from  the  interior  to  the  coast.     These  obstacles  have 
been  at  length  successfully  surmounted  by  the  develop- 
ment of  our  system  of  canals  and  railroads;  but  there 
remains  before  us  yet  a  long  series  which  will  require 
an  active  policy  on  the  part  of  our  people  to  surmount 
without  creating  that  unequal  distribution  of  wealth 
which  shuts  out  all  social  progress. 

In  the  beginning  we  had  infant  industries  to  protect 
and  develop,  because  we  lacked  those  social  conditions 
which  are  necessary  for  the  successful  prosecution  of 
the  textile  and  iron  industries.  Infant  industries  are, 
however,  something  that  a  nation  will  always  have  as 
long  as  it  remains  in  a  dynamic  condition.     If  a  people 

E  g  9 


98        THE  ECONOMIC  BASIS  OF  PROTECTION.       ' 

become  static  and  wish  merely  for  the  same  few  articles 
that  their  ancestors  had,  then  of  course  there  are  no 
new  industries  to  develop.  With  every  change  in  the 
economic  conditions  of  the  country  and  with  every 
growth  of  variety  in  the  tastes  of  the  people,  new  in- 
dustries are  called  for  to  supply  the  demand  of  the 
people  for  new  articles.  These  industries  need  the 
same  protection  and  encouragement  that  those  devel- 
oped in  the  past  received.  We  cannot  have  an  or- 
derly, consistent  development  of  our  country  and  its 
resources  unless  the  national  policy  is  so  directed  that 
it  will  encourage  the  introduction  of  new  industries 
with  every  change  in  the  tastes,  habits,  or  environment 
of  the  people. 

There  is  more  than  this  to  keep  in  mind.  Many  of 
the  present  wants  of  our  people,  now  obtained  from 
foreign  lands,  can  with  economy  be  supplied  by  home 
production.  Our  climate  and  soil  are  well  fitted  for  the 
production  of  many  articles  now  coming  from  foreign 
countries,  and  our  undeveloped  mineral  resources  can 
supply  us  with  many  metals  for  which  we  are  now  de- 
pendent upon  foreign  lands. 

I  shall  illustrate  my  point  with  several  specific  ex- 
amples which  apply  especially  to  the  undeveloped  con- 
dition of  the  South.  Our  Southern  States  lie  in  a 
semi-tropical  region  and  are  well  fitted  for  all  those 
crops  which  we  secure  from  similar  regions  abroad. 
The  reason  why  these  crops  are  not  grown  at  home  lies 
solely  in  the  social  condition  of  the  South,  which  has 
almost  compelled  the  people  to  confine  their  industrial 
activities  to  the  production  of  cotton  and  tobacco.    These 


THE  ECONOMIC  BASIS  OF  PROTECTION.        99 

social  conditions  liave  now  passed  away,  and  there  is  no 
reason  why  a  great  variety  of  industries  cannot  be  suc- 
cessfully prosecuted  in  the  Southern  States  as  soon  as 
the  obstacles  to  their  introduction  are  set  aside.  An 
example  of  this  we  find  in  the  production  of  tea. 
There  are  many  portions  of  the  Soutli  where  tea  can 
be  produced  with  as  little  labor  as  in  any  part  of 
China.  The  obstacle  lies  wholly  in  the  ignorance  of 
the  Southern  people  with  respect  to  the  proper  methods 
of  cultivating  the  tea-plant  and  in  the  lack  of  en- 
couragement which  the  nation  should  offer  to  those  who 
would  endeavor  to  produce  tea.  Were  we  willing  to 
pay  the  additional  price  needed  to  overcome  the  ob- 
stacles to  the  introduction  of  tea-culture  in  the  South, 
we  should  soon  be  enabled  to  produce  it  with  as  little 
labor  as  in  any  part  of  the  world. 

A  second  illustration  is  in  the  production  of  raw 
silk.  No  part  of  the  world  can  surpass  many  portions 
of  our  country  in  the  favorable  conditions  for  the  pro- 
duction of  silk.  Here  again  the  obstacle  to  the  sue- 
cessful  introduction  of  this  industry  lies  in  the  series 
of  temporary  obstacles  which  must  be  overcome  before 
the  industry  can  be  prosecuted  with  success.  The  tem- 
porary price  must  in  the  end  be  paid,  and  when  the 
American  people  are  willing  to  pay  this  price  an  im- 
mense increase  of  home  industry  will  follow  to  the  ad- 
vantage of  the  whole  people. 

The  present  condition  of  Florida  is  perhaps  as  good 
an  illustration  of  my  point  of  view  as  can  be  found. 
Florida  and  Cuba  are  under  the  same  climatic  condi- 
tions.    They  are  in  the  same  latitude,  surrounded  by 


100      THE  ECONOMIC  BASIS  OF  PROTECTION. 

large  bodies  of  water,  which  maintain  an  even  temper- 
ature, and  thus  enable  all  those  semi-tropical  plants 
to  develop  which  are  now  in  so  great  a  demand. 
Cuba,  however,  has  the  advantage  of  Florida  in  one 
respect,  which  has  made  it  one  of  the  most  productive 
regions  in  the  world,  and  the  lack  of  which  has  made 
Florida  a  wilderness.  Cuba  has  a  natural  system  of 
drainage,  and  its  waters  flow  freely  and  easily  into 
the  ocean.  Florida,  from  its  geological  formation,  has 
a  series  of  obstacles  stan  dingin  the  way  of  the  flow  of 
the  water  into  the  ocean.  Remove  these  obstacles, 
drain  the  whole  surface  of  Florida,  and  our  dependence 
upon  Cuba  would  cease.  We  could  then  produce  our 
sugar  and  tobacco  in  Florida,  and  at  no  greater  cost 
than  it  is  now  obtained  from  Cuba.  We  might  even, 
without  exaggeration,  make  a  still  stronger  statement 
and  say  that  all  these  articles  could  be  produced  at  half 
their  present  cost  in  Florida  if  it  were  brought  into 
a  condition  to  be  successfully  cultivated.  The  unciv- 
ilized condition  of  Cuba  prevents  the  introduction  of 
machinery  and  keeps  the  social  condition  of  the  people 
at  so  low  a  state  that  they  do  not  have  half  the  pro- 
ductive power  that  a  more  civilized  race  would  have. 
With  the  stable  government  which  Florida  now  has 
all  those  unsatisfactory  conditions  which  exist  in  Cuba 
could  be  avoided,  and  as  a  result  the  productive  power 
of  Florida  would  far  surpass  that  of  Cuba,  and  its  use- 
fulness to  the  whole  country  would  be  correspondingly 
greater.  The  far  West  with  its  arid  plains  presents 
another  series  of  obstacles  to  progress.  This  vast 
region  will  be  comparatively  useless  to  the  American 


THE  ECONOMIC  BASIS  OF  PROTECTION.      101 

people  until  a  comprehensive  system  of  irrigation  is 
made  a  part  of  our  national  policy. 

The  obstacles  to  the  successful  development  of  agri- 
culture in  the  South  and  far  West  stand  out  more 
clearly  than  do  those  of  other  sections  of  our  country, 
yet  iu  reality  they  are  not  more  important. 

American  soil  is  poorly  fitted  to  the  growth  of  grain, 
and  the  obstacles  to  the  successful  cultivation  of  other 
crops  niu-t  be  removed  before  our  agriculture  can  be- 
come as  productive  as  it  should  be.  The  productivity 
of  root  crops  in  our  country  is  so  great  that  their  devel- 
opment is  a  condition  of  agricultural  prosperity.  The 
present  breeds  of  live-stock  need  also  to  be  developed 
and  modified  so  that  they  will  become  better  adjusted 
to  American  climatic  and  economic  conditions.  Our 
cattle,  sheep,  and  hogs  are  not  American  animals,  but 
are  recent  importations  from  foreign  climes.  They 
are  accustomed  to  live  upon  those  products  which  are 
fitted  to  European  conditions,  and  before  they  can 
become  most  advantageous  to  us  they  must  develop 
characteristics  which  will  fit  them  for  American  cli- 
mate and  for  feeding  upon  those  crops  most  suitable 
to  American  soil. 

The  removing  of  obstacles  can  be  well  illustrated  by 
the  growth  of  the  beet-sugar  production  in  Germany. 
German  conditions  are  not  as  well  adapted  to  the 
production  of  sugar  as  the  climate  of  more  southern 
regions,  but  Germany  is  the  centre  of  a  great  civiliza- 
tion, and  its  people  were  not  satisfied  with  the  high  cost 
of  the  sugar  they  obtained  from  southern  regions. 
This  high  cost  was  a  result  of  the  crude  processes  in 

9* 


102      THE  ECONOMIC  BASIS  OF  PROTECTION. 

the  manufacture  of  sugar  which  were  in  use  in  all 
cane-sugar  producing  countries.  Had  these  regions 
been  fully  civilized  and  their  industries  been  highly 
developed,  the  beet-sugar  industry  of  Germany  could 
not  have  succeeded.  Under  existing  social  conditions, 
however,  we  have  a  contest  between  efficient  labor  on 
the  part  of  the  German  people  and  favorable  climatic 
conditions  on  the  part  of  the  cane-sugar-prod uciug 
countries.  In  this  contest  the  efficient  labor  of  the 
German  people  gives  them  a  supremacy,  and  as  a 
result  we  have  a  lower  price  of  sugar  than  we  could 
have  had  if  we  had  relied  solely  upon  the  semi-tropical 
regions  inhabited  by  half-civilized  peoples. 

There  is  another  fact  in  this  connection  still  further 
illustrating  my  point  of  view.  The  beet  when  first 
cultivated  in  Germany  contained  but  a  small  percent- 
age of  sugar.  It  took  fifty  years  of  careful  scientific 
investigation  and  experiment  before  a  beet  could  be 
produced  which  contained  a  large  percentage  of  sugar 
and  at  the  same  time  was  fitted  to  the  climatic  condi- 
tions of  Germany.  There  were,  however,  more  obsta- 
cles to  surmount  than  these.  It  was  found  that  a  beet 
which  would  yield  a  large  percentage  of  sugar  in  one 
locality,  if  transferred  only  a  short  distance  upon  other 
soils  would  often  produce  a  much  smaller  quantity  of 
sugar,  or  the  sugar  might  be  in  such  chemical  combi- 
nations as  to  make  its  extraction  unprofitable.  Hence  a 
new  series  of  experiments  were  necessary  for  each 
locality,  and  the  extension  of  the  cultivation  of  the 
beet  has  followed  the  gradual  surmounting  of  these 
obstacles  in  each  locality  by  careful  scientific  investi- 


THE  ECONOMIC  BASIS  OF  PROTECTION.      103 

gation.  If  the  American  people  would  take  half  this 
care  to  domesticate  new  crops  they  would  be  as  well 
rewarded. 

Thus  tar  I  have  treated  merely  of  the  obstacles  to 
the  development  of  natural  resources.  There  is,  how- 
ever, another  series  of  obstacles  of  even  greater  im- 
portance which  must  be  surmounted  before  the  industry 
of  the  American  people  will  be  as  efficient  as  it  might 
be.  Not  only  must  Americans  develop  American  re- 
sources, but  Americans  must  adjust  themselves  to 
American  conditions.  We  are  at  best  but  recent  emi- 
grants from  foreign  countries,  and  our  tastes  and  habits 
are  largely  the  results  of  the  European  conditions  in 
which  our  ancestors  lived  for  so  long  a  time.  When 
our  forefathers  came  to  America  they  found  them- 
selves in  a  new  economic  environment,  and  since  then 
we  have  been  slowly  adjusting  ourselves  to  it.  Yet 
this  progress  has  been  very  slow,  because  the  customs 
and  habits  which  they  brought  with  them  were  the  re- 
sult of  ages  of  slow  development  and  cannot  be  changed 
in  a  single  generation.  American  people  in  the  end 
must  live  upon  those  articles  for  which  American  soil 
is  most  productive,  and  must  cease  to  consume  in  as 
large  quantities  as  they  do  those  articles  for  which  our 
soil  is  but  poorly  adapted.  New  articles  of  diet  will 
find  their  way  into  use,  and  habits  and  customs  will 
develop  which  will  make  the  American  of  the  future 
a  man  utilizing  all  the  resources  of  our  country. 

American  history  furnishes  many  illustrations  of  the 
evil  effects  of  the  passive  policy  pursued  by  our  nation 
through  which  the  obstacles  to  economic  progress  were 


104      TEE  ECONOMIC  BASIS  OF  PROTECTION. 

not  overcome  as  rapidly  as  they  should  be.  If  new 
resources  are  not  opened  up  with  the  increase  of  popu- 
lation poorer  resources  in  conjunction  with  those  now 
in  use  have  to  be  resorted  to  by  the  additional  popula- 
tion, and  in  this  way  there  is  a  great  waste  of  capital 
and  of  productive  power.  Such  an  economic  waste 
presents  itself  in  the  period  between  1825  and  1840. 
At  that  time  all  the  better  resources  of  the  Eastern 
States  were  developed.  The  question  then  was,  Shall 
the  additional  population  be  aided  in  its  progress  to- 
wards Western  States  whose  resources  are  not  in  use, 
or  shall  this  additional  population  find  employment 
upon  the  poorer  resources  not  yet  developed  in  Eastern 
States?  A  national  party  was  active  in  endeavoring 
to  open  up  the  resources  of  the  Western  States,  but 
unfortunately  for  our  nation  it  was  defeated,  and  the 
party  favoring  a  passive  policy  continued  in  power. 
What  was  the  result?  The  additional  population, 
instead  of  going  to  the  West  as  it  should,  brought 
poorer  lands  in  every  part  of  the  East  into  cultivation. 
Immense  quantities  of  labor  were  expended  in  prepar- 
ing this  land  for  cultivation  by  removing  stones,  cut- 
ting down  forests,  opening  up  roads,  and  other  needed 
improvements  which  are  necessary  for  agricultural 
prosperity.  During  the  next  twenty  years,  however, 
the  obstacles  standing  in  the  way  of  the  movement 
of  population  into  Western  States  were  overcome, 
and  the  extra  population  passed  rapidly  and  easily  into 
the  newer  sections  of  the  West.  Their  labor  was  so 
productive  in  the  West  that  they  underbid  the  farmers 
of  the  East  and  forced  the  price  of  agricultural  produce 


THE  ECONOMIC  BASIS  OF  PROTECTION.      105 

to  so  low  a  point  that  a  large  part  of  the  Eastern  farms 
could  no  longer  be  cultivated  with  profit.  To  a  large 
extent  these  farms  have  gone  out  of  cultivation,  and  as 
a  result  the  immense  quantities  of  labor  and  capital 
which  were  needed  to  bring  them  into  cultivation  have 
been  a  national  loss. 

Suppose  instead  of  allowing  all  the  quantity  of  labor 
and  capital  to  be  used  up  in  bringing  the  poorer  lands 
of  the  East  into  cultivation  a  mere  fraction  of  it  had 
been  expended  in  opening  up  the  West  to  Eastern 
settlers  twenty  years  before  it  was,  would  not  the  re- 
sult have  been  of  great  advantage  to  the  whole  Ameri- 
can people  ?  Would  not  all  that  waste  of  labor  and 
capital  have  been  avoided,  caused  by  bringing  into 
cultivation  the  poorer  lands  of  the  East  only  in  the  end 
to  go  out  of  use  again  ? 


CHAPTER  XI. 

THE  FUTUEE  OF  EAW  MATERIAL. 

In  the  production  of  raw  material  we  have  the  last 
part  of  a  long  struggle  of  man  with  nature.  Elsewhere 
civilized  man  is  now  supreme  and  has  cast  off  the  bonds 
that  held  him  to  natural  production.  In  primitive 
nations  production  is  confined  to  localities  where  nature 
does  so  much  that  crude  ignorant  men  can  do  the  rest. 
In  the  production  of  finished  commodities  this  influence 
of  location  is  reduced  to  a  minimum.  The  extensive 
use  of  capital,  skill,  and  intelligence  have  freed  modern 
nations  from  the  primitive  forms  of  production  which 
confined  each  industry  to  particular  regions  where  na- 
ture gave  the  most  assistance.  Water-power  is  no 
longer  essential  to  national  prosperity,  steamboats  are 
displacing  sailing  vessels,  linen  is  no  longer  sent 
to  Holland  to  be  bleached,  and  railroads  have  given  to 
the  interior  of  continents  the  advantages  formerly  con- 
fined to  the  sea-coast.  In  short,  the  advantages  of 
localities  having  particular  combinations  of  natural 
forces  or  agents  have  been  greatly  diminished,  if  not 
entirely  lost.  Man  is  still  dependent  upon  natural 
forces,  but  not  as  much  as  formerly  upon  the  natural 
features  of  given  localities  or  regions.  Every  new 
utilization  of  natural  forces  decreases  our  dependence 
106 


THE  ECONOMIC  BASIS  OF  PROTECTION.      107 

upon  those  productive  processes  in  which  natural  pro- 
duction is  advantageous. 

Before  our  civilization  reaches  the  goal  towards  which 
it  is  advancing,  this  dependence  of  mau  on  natural 
production  must  cease  in  the  case  of  raw  material,  as  it 
has  already  ceased  in  other  forms  of  production.  In 
the  end  capital  and  intelligence  will  discover  new 
methods  for  the  production  of  raw  material,  through 
which  the  monopoly  of  particular  regions  will  be 
broken  down.  A  careful  study  of  the  conditions  of 
production  and  of  the  physical  characteristics  of  other 
regions  will  show  what  obstacles  confine  the  produc- 
tion of  each  kind  of  raw  material  to  its  present  limits 
and  how  these  obstacles  may  be  displaced.  A  passive 
dependence  upon  the  crude  production  of  ignorant  men 
in  favored  localities  leads  to  high  prices  and  monopo- 
lies. An  active  policy,  on  the  other  hand,  by  encour- 
aging the  use  of  capital  and  intelligence  at  home,  will 
create  new  industries  and  open  up  new  regions  where 
civilized  men  can  displace  the  natural  production  of 
the  regions  now  furnishing  the  world  with  raw  ma- 
terial. 

The  present  condition  of  the  production  of  raw  ma- 
terials creates  a  special  need  of  activity  on  the  part  of 
the  more  civilized  races  so  as  to  remove  the  remaining 
obstacles  to  economic  progress.  The  rapid  growth  of 
population  and  of  new  wants  has  caused  a  great  in- 
crease in  the  demand  for  all  kinds  of  raw  material,  and 
tins  demand  tends  to  increase  more  rapidly  than  the 
increase  of  the  production  in  those  regions  from  which 
we  obtain  our  raw  material.     I  refer  especially  to  those 


108      THE  ECONOMIC  BASIS  OF  PROTECTION. 

crops  which  we  obtain  from  semi-tropical  countries. 
They  are  now  produced  under  very  crude  conditions  by 
the  least  progressive  nations.  As  a  result  the  pro- 
duction of  sugar,  coffee,  spices,  and  other  such  crops  is 
limited  to  a  few  favored  localities  where  nature  supplies 
all  the  conditions  necessary  to  production.  Only  a  few 
islands  or  specially  favored  localities  upon  the  conti- 
nents have  that  combination  of  climate  and  soil  which 
is  necessary  for  the  easy  production  of  these  crops. 
These  localities  must  also  be  naturally  healthy  to  en- 
able the  people  to  avoid  the  disadvantages  of  the  trop- 
ical climate.  All  these  combinations  are  seldom  found 
in  one  place,  and  as  a  result  only  a  small  part  of  the 
whole  semi-tropical  region  is  of  any  use  to  civilized 
man.  The  demand  of  the  civilized  world  for  these 
products  has  now  increased  to  such  an  extent  that  the 
supply  can  no  longer  be  obtained  from  the  more  favored 
localities.  As  a  result  of  these  circumstances  we  are 
paying  monopoly  prices  for  all  this  class  of  articles. 
By  this  I  do  not  mean  that  there  has  been  any  marked 
increase  in  the  price  of  these  articles.  I  simply  mean 
that  we  are  paying  twice  or  perhaps  three  times  as 
much  for  them  as  we  would  pay  if  they  were  produced 
under  civilized  conditions. 

There  can  be  but  one  way  of  escaping  from  this  dif- 
ficulty. These  articles  which  are  produced  at  present 
under  natural  conditions  must  be  cultivated  by  civilized 
people  under  artificial  conditions.  In  other  words, 
they  must  be  cultivated  in  places  where  nature  is  less 
favorable  and  does  less  for  the  production  of  the  crop, 
but  where  this  disadvantage  is  counteracted  by  the 


THE  ECONOMIC  BASIS  OF  PROTECTION.      109 

greater  efficiency  of  the  labor  in  civilized  countries  to- 
gether with  a  greater  use  of  capital.  This  contest  of 
natural  and  artificial  production  is  clearly  illustrated  in 
the  competition  between  the  beet-sugar  industry,  to 
which  I  have  referred,  and  that  of  cane-sugar.  Ger- 
many has  capital  and  skill,  but  they  work  under  the 
disadvantage  of  an  unfavorable  climate.  Cuba,  how- 
ever, has  all  these  climatic  conditions,  but  lacks  skill 
and  capital.  German  civilization  cannot  reduce  the 
price  of  sugar  to  such  a  point  as  would  be  possible  if 
the  same  skill  and  labor  were  employed  in  Cuba.  It 
can,  however,  reduce  the  price  of  sugar  far  below  what 
it  would  be  if  we  depended  solely  upon  the  present 
Cuba  for  our  sugar. 

Perhaps  the  best  illustration  of  all  is  in  this  country. 
There  is  no  region  of  the  world  more  poorly  fitted  for 
the  cereals,  and  especially  for  wheat,  than  the  great 
corn  belt  of  Northern  Illinois  and  the  adjacent  States. 
Yet  the  cultivation  of  wheat  in  this  region  has  revolu- 
tionized its  production.  The  disadvantage  of  the 
West  in  having  a  soil  poorly  adapted  to  wheat  was 
more  than  balanced  by  the  skill  and  intelligence  of  its 
people.  All  the  great  inventions  reducing  the  cost  of 
raising,  cutting,  binding,  and  threshing  the  wheat  are 
the  results  of  the  contest  between  American  skill  and 
intelligence  working  under  adverse  natural  conditions 
and  the  less  intelligent  farmers  in  lands  more  favored 
by  nature.  Natural  and  artificial  production  were 
pitted  against  one  another,  and  the  success  of  the  arti- 
ficial proves — what  there  would  lie  no  need  of  proving 
but  for  free-trade  fallacies — that  skill  and  intelligence 

10 


HO      THE  ECONOMIC  BASIS  OF  PROTECTION. 

are  more  powerful  factors  in  national  prosperity  than 
nature  or  climate. 

These  examples,  however,  are  merely  single  illustra- 
tions of  a  thought  which  can  be  applied  in  many 
directions.  The  production  of  coffee  is  as  much  above 
its  necessary  cost  as  was  the  cost  of  sugar.  Capital 
and  skilled  labor  in  less  favored  localities  than  Java  or 
Brazil  could  produce  our  coffee  at  a  lower  price  than  we 
now  pay  for  it.  The  same  can  be  said  of  tobacco,  or 
of  rice,  or  of  tea,  or  any  other  of  those  semi-tropical 
crops  or  fruits  for  which  the  demand  of  civilized  people 
is  growing  so  rapidly  and  must  grow  still  more  rapidly 
in  the  future  with  every  increase  in  the  variety  of  our 
wants. 

The  same  difficulty  presents  itself  in  the  production 
of  other  kinds  of  raw  materials.  Our  natural  forests 
will  soon  cease  to  give  us  that  quantity  of  wood  which 
we  need.  If  the  price  is  to  be  kept  at  any  reasonable 
figure  it  must  result  from  the  artificial  cultivation  of 
trees  in  large  sections  of  our  country.  With  natural 
production  alone  we  shall  soon  have  a  very  high  price 
for  timber,  increasing  with  each  succeeding  age. 

Another  illustration  is  that  of  wool.  At  the  present 
time  the  greater  part  of  our  wool  is  raised  in  semi- 
civilized  nations,  in  distant  places  like  Australia  or 
parts  of  the  far  West  which  are  not  yet  filled  up. 
There  is  no  way  by  which  the  ever-increasing  demand 
for  wool  can  be  supplied  from  these  natural  sources 
without  an  increase  of  price.  The  area  of  Australia  is 
limited,  and  what  is  more,  the  part  of  it  devoted  to 
wool   will    gradually  decrease.     The  development  of 


THE  ECONOMIC  BASIS  OF  PROTECTION,      m 

agriculture  must  in  time  reduce  the  quantity  of  land 
used  solely  for  raising  sheep.  The  people  of  Australia 
are  as  dissatisfied  with  their  dependence  upon  the 
production  of  wool  as  the  people  of  the  North  were 
with  the  production  of  wheat.  They  recognize  how 
large  a  part  of  the  productive  capacities  of  their  land  is 
wasted  while  sheep-raising  is  the  leading  industry. 
The  growth  of  national  life  and  the  spirit  of  indepen- 
dence will  soon  create  'among  them  a  desire  for  a  more 
active  policy  through  which  their  industries  will  be 
diversified  and  their  land  put  to  better  uses.  The  re- 
sult is  that  the  supply  of  wool  from  these  sources  is 
limited,  and  we  must  expect  as  time  goes  on  to  have  a 
higher  price  for  it  until  the  more  civilized  races  resort 
to  raising  sheep  in  connection  with  their  agriculture. 

In  no  respect  is  a  passive  reliance  on  free-trade  a 
greater  failure  than  in  the  production  of  wool.  Eng- 
land admitted  wool  free  of  duty  to  get  cheaper  wool, 
yet  at  the  end  of  thirty  years  its  price  had  risen  fifty 
per  cent.  Even  at  its  present  low  price  it  is  as  costly  as 
before  the  free-trade  epoch.  The  regions  of  the  world 
fitted  only  for  sheep-raising  are  not  sufficiently  exten- 
sive to  supply  the  wool  needed  for  the  world's  con- 
sumption, and  it  is  a  delusion  to  hope  for  cheaper  wool 
from  such  a  source. 

The  same  truth  reveals  itself  in  the  production  of 
iron  as  well  as  of  coal.  The  mines  of  England  from 
which  in  the  past  so  large  a  part  of  the  world's  supply 
of  iron  has  been  produced  are  now  becoming  exhausted, 
or  at  least  they  have  reached  the  limit  of  their 
productivity.     We   must  expect  a  steady  rise  in  the 


112      THE  ECONOMIC  BASIS  OF  PROTECTION. 

price  of  iron-ware  unless  new  regions  are  developed  in 
America  which  have  the  favorable  conditions  for  the 
iron  industry.  The  development  of  American  iron- 
works is  essential  to  keeping  the  price  of  iron  in  the 
present  place  or  to  any  further  reduction  in  it. 

The  progress  of  our  civilization  depends  upon  the 
cheapening  of  food  and  raw  material ;  but  a  great  mis- 
take is  made  by  assuming  that  free-trade  and  a  passive 
policy  can  bring  about  this  result.  High  prices  alone 
do  not  cause  producers  to  use  better  methods  of  pro- 
duction. Free  commerce  has  separated  these  producers 
so  widely  from  consumers  that  the  high  bid  of  the  latter 
for  food  and  raw  material  does  not  add  to  the  endure- 
ment  of  the  former  to  improve  production.  The  pro- 
ducers now  get  little  benefit  from  the  high  prices  the 
consumers  must  pay.  The  monopolies  between  them 
absorb  the  difference  between  producers'  and  consumers' 
prices,  and  thus  prevent  those  changes  in  the  produc- 
tion of  food  and  raw  material  which  fair  prices  to 
producers  would  bring. 

An  active  policy  can  secure  what  mere  high  prices 
cannot.  It  can  create  a  demand  for  new  crops,  and 
thus  enable  the  land  to  be  used  for  what  it  is  best 
fitted.  Increase  the  variety  of  crops,  and  farmers  can 
become  more  prosperous,  even  with  present  prices. 
Cause  the  land  through  free-trade  to  be  used  for  one 
crop,  and  the  highest  prices  will  not  compensate  for 
the  decreasing  fertility  of  the  soil.  Farmers'  interests 
lie  in  fair  prices  for  many  crops,  and  not  in  high  prices 
for  one  crop.  Their  interests  therefore  harmonize  with 
consumers'  interests.     The  only  policy  that  can  bring 


THE  ECONOMIC  BASIS  OF  PROTECTION.      H3 

prosperity  to  both  classes  is  the  one  that  will  create  a 
demand  for  all  kinds  of  food  and  raw  material  under 
conditions  that  will  allow  civilized  men  to  produce 
them.  Shut  out  crude  natural  production,  and  we  will 
get  our  food  and  raw  material  from  our  neighbors  at  a 
lower  price  than  ever  before. 

There  is,  therefore,  a  duty  devolving  upon  the  more 
advanced  nations  of  the  world.  Unless  they  take 
those  measures  necessary  to  bring  under  civilized  con- 
ditions all  those  productions  which  are  now  carried 
on  by  partially-civilized  races,  we  must  expect  the 
price  of  raw  material  to  increase  gradually  and  an  ever- 
increasing  part  of  the  whole  produce  of  the  world  to 
pass  into  the  hands  of  those  who  own  the  natural  re- 
sources now  in  use.  All  these  industries  must  be  trans- 
ferred to  the  civilized  nations  by  the  introduction  of 
a  more  scientific  production.  We  must  take  from  land- 
holders in  these  favored  localities  and  from  the  states 
that  oppress  them  all  that  revenue  which  comes  to 
them  from  the  present  use  of  their  land  before  the 
conditions  will  be  favorable  for  a  more  scientific  culti- 
vation of  the  soil  in  semi-tropical  regions.  The  be.-t 
way  to  civilize  these  regions  will  be  to  displace  their 
industries  by  those  of  the  more  civilized  races.  This 
policy  will  break  up  the  present  combination  of  land- 
lords and  state  by  which  the  people  are  kept  down  and 
enable  them  to  develop  into  a  higher  civilization  with 
that  skill  and  capital  which  is  needed  to  make  them 
and  the  regions  which  they  occupy  more  useful  to  the 
whole  world. 

h  10* 


CHAPTER    XII. 

THE   CONSUMPTION   OF   WEALTH. 

In  the  preceding  chapters  the  attention  has  been 
directed  to  the  material  environment  of  the  American 
people  and  the  manner  in  which  this  environment  may- 
be made  most  useful.  There  is,  however,  another  side 
to  the  economic  development  of  the  American  people 
of  equal  importance.  We  must  not  only  make  the 
best  use  of  all  our  material  resources  to  get  from  our 
environment  all  possible  assistance,  but  we  must  also 
in  a  large  degree  adjust  ourselves  to  that  environment 
so  that  our  pleasures  and  wants  can  be  easily  supplied 
from  the  material  resources  by  which  we  are  sur- 
rounded. To  a  people  like  the  American,  who  are  al- 
most unconscious  of  the  immense  possibilities  of  their 
country,  an  examination  into  the  causes  which  at 
present  prevent  a  more  varied  consumption  of  wealth 
is  of  supreme  importance.  It  hardly  needs  proof  that 
the  consumption  of  wealth  by  the  American  people  is 
not  as  well  directed  as  it  might  be.  That  consumption 
of  wealth  is  the  most  advantageous  which  creates  a  de- 
mand for  the  products  of  the  soil  in  that  proportion 
which  will  allow  the  best  use  of  the  soil.  If  while  a 
field,  when  its  powers  are  fully  utilized,  can  yield  two 
hundred  bushels  of  wheat  and  five  hundred  bushels  of 
corn  there  should  be  a  demand  for  five  hundred  bushels 
114 


THE  ECONOMIC  BASIS  OF  PROTECTION.      H5 

of  wheat  and  only  two  hundred  of  corn,  it  is  plain  that 
the  land  must  be  used  too  often  for  wheat  and  the  soil 
will  not  be  as  productive  as  it  might  be  with  a  change 
in  the  demand  for  wheat  and  corn.  The  total  produc- 
tion of  the  field  being  reduced,  the  labor  of  the  com- 
munity needed  to  supply  itself  with  food  would  be 
greatly  increased. 

It  is  also  necessary  to  call  attention  to  the  fact  that 
our  present  consumption  is  not  final.  AVhat  we  eat 
and  wear  are  to  a  large  degree  the  results  of  past  con- 
ditions when  our  ancestors  lived  in  another  environ- 
ment in  other  lands.  These  acquired  habits  have 
created  in  us  a  liking  for  particular  articles  of  food, 
and  are  accompanied  by  prejudices  keeping  us  from 
using  many  articles  which  could  now  be  produced  with 
great  advantage.  We  are  at  the  present  time  rapidly 
undergoing  radical  changes  in  our  diet.  This  fact  can 
be  clearly  seen  by  an  examination  of  any  grocery -store. 
Twenty  years  ago  the  ordinary  store  contained  only  a 
few  staple  articles  consumed  by  all  the  people.  These, 
together  with  meat,  potatoes,  and  bread,  formed  the 
sole  diet.  Every  grocery-store  now  contains  a  great 
variety  of  articles  not  found  in  it  during  any  previous 
period.  A  rapid  increase  in  variety  could  not  happen 
if  there  was  not  a  growing  demand  on  the  part  of  the 
American  people  for  a  great  number  of  new  articles 
for  their  food-supply. 

This  change  in  diet  is  to  a  large  extent  due  to  a  great 
decrease  in  the  price  of  many  articles  not  formerly 
consumed  by  the  people  in  large  quantities  on  account 
of  their  high  price.     Of  these  articles,  sugar  forms  the 


116      THE  ECONOMIC  BASIS  OF  PROTECTION. 

best  illustration.  The  changes  of  the  last  few  years 
have  reduced  the  price  of  sugar  by  at  least  fifty  per 
cent.  Sugar  can  now  be  produced  as  cheaply  as  flour. 
The  result  is  everywhere  apparent.  A  large  part  of 
our  diet  is  sweetened,  and  many  articles  of  food  are 
thus  made  pleasant  which  formerly  were  distasteful. 
The  rapid  transit  caused  by  the  use  of  steam  has  greatly 
reduced  the  price  of  fruit  all  over  our  country  and  en- 
ables every  one  to  make  many  kinds  of  fruit  a  promi- 
nent part  of  his  diet.  Cheap  sugar  is  also  an  impor- 
tant element  in  the  increased  demand  for  fruit;  because 
when  sweetened  it  is  much  more  easily  preserved  and 
more  pleasant  to  eat. 

The  needed  adjustment  of  the  consumption  of  the 
American  people  to  their  environment  was  delayed 
a  long  time  on  account  of  the  commercial  relations  of 
our  country.  The  first  settlers  must  raise  what  they 
can  export, — articles  having  a  great  value  in  a  small 
bulk.  So  long  as  the  leading  crops  of  America  were 
corn,  tobacco,  and  wheat,  but  small  progress  could  be 
made  in  the  adjustment  of  Americans  to  American 
conditions.  It  was  natural  also  that  first  settlers  com- 
ing from  other  countries  should  desire  articles  suited  to 
their  late  homes  and  have  a  prejudice  against  any  other 
diet.  The  small  use  which  the  American  people  make 
of  corn  is  a  result  of  such  prejudices.  It  is  unfortu- 
nate that  an  article  so  well  fitted  for  the  American  soil 
should  be  kept  so  completely  out  of  use  on  account  of 
the  habits  and  customs  which  our  forefathers  acquired 
in  other  countries  and  where  corn  could  not  be  raised. 
If  the  ancestors  of  the  American  people  had  come  from 


THE  ECONOMIC  BASIS  OF  PROTECTION.      H7 

a  corn-producing  country  these  prejudices  could  not 
have  existed,  and  more  rapid  progress  would  have  been 
made  towards  the  adjustment  of  our  consumption  to 
the  necessary  conditions  of  our  country. 

The  same  effect  of  European  conditions  shows  itself 
in  our  clothing  as  well  as  in  our  food.  Our  ancestors 
were  reared  in  a  country  very  productive  of  wool  and 
in  which  there  was  no  cotton.  In  modern  times  there 
has  been  a  great  change  in  the  relative  value  of  wool 
and  cotton.  Wool  has  become  more  expensive,  while 
cotton  goods  have  been,  through  the  use  of  machinery, 
greatly  reduced  in  price.  Our  mode  of  dressing  was 
formed  when  wool  was  the  cheaper  article,  or  perhaps 
it  is  better  to  say  the  only  article.  Had  our  ancestors 
come  from  a  country  where  cotton  was  in  common  use, 
our  external  garments  would  have  been  made  of  cotton 
and  not  of  wool.  As  the  result  of  habit  and  custom 
we  adhere  to  the  use  of  wool  when  we  might  be  prop- 
erly and  warmly  clothed  at  much  less  expense.  I  refer 
particularly  to  our  external  garments.  The  same 
warmth  needed  to  withstand  our  rigid  climate  of 
winter  might  be  obtained  by  using  wool  as  under- 
garments. This  grade  of  wool  is  still  very  cheap,  and 
can  easily  be  produced  in  America.  We  can  get  thus 
any  amount  of  warmth  without  great  cost,  but  the  long 
wools  from  which  our  external  clothing  is  made  have 
become  very  costly.  Such  garments  must  in  the  end 
be  displaced  by  some  cheaper  form  of  clothing,  perhaps 
of  cotton,  unless  the  future  gives  us  some  article  more 
in  harmony  with  good  taste.  The  change  from  woollen 
to  cotton  clothing  has  already  taken  place  to  some  ex- 


118      THE  ECONOMIC  BASIS  OF  PROTECTION. 

tent.  Women  use  calico  and  muslin  extensively,  and 
laboring  men  have  also  found  that  warmth  and  cheap- 
ness are  best  combined  with  woollen  underclothing 
covered  by  a  jacket  and  overalls  made  of  cotton. 
The  latter  protects  the  former  from  wear  and  dirt,  and 
can  be  replaced  with  but  little  expense  when  worn  out. 
The  accepted  idea  that  cotton  garments  cannot  be  made 
warm  is  a  false  one.  Cotton  when  first  introduced  was 
used  as  a  substitute  for  linen.  To  make  it  resemble 
linen  as  closely  as  possible  a  hard  finish  was  given  it. 
The  way  cotton  is  spun  and  woven  makes  cotton  gar- 
ments cool.  Cotton,  however,  resembles  wool  more 
closely  than  linen,  and  where  the  cloth  made  from  it  is 
given  a  soft  finish,  it  feels  like  wool.  The  use  of 
cotton  in  our  winter  garments  is  rapidly  increasing, 
and  the  day  is  not  far  distant  when  many  of  them  will 
be  woollen  more  in  name  than  in  fact. 

In  the  temperance  movement  and  its  effect  upon  the 
diet  of  the  American  people  still  another  good  illustra- 
tion of  the  change  going  on  at  the  present  time  in  con- 
sumption can  be  seen.  At  an  early  period,  when 
drinking  habits  where  formed  by  our  ancestors  in 
Europe,  the  price  of  barley  and  rye  from  which  drinks 
were  largely  made,  was  very  low.  The  people  had  no 
better  means  of  utilizing  these  cereals  than  in  making 
their  liquor.  The  great  increase  in  the  demand  for 
food  has  increased  the  price  of  all  those  articles  from 
which  beer  and  whiskey  are  made.  As  a  result  a 
liquor  diet,  while  being  the  cheapest  diet  our  ancestors 
could  procure,  has  become,  relative  to  the  cost  of  other 
articles  of  food,  a  costly  diet.     Even  if  there  were  no 


THE  ECONOMIC  BASIS  OF  PROTECTION.      H9 

temperance  movement,  the  effect  of  this  change  in  the 
price  of  the  articles  composing  a  liquor  diet  would  be 
to  diminish  their  use.  The  change  in  cost  of  the  diet 
of  drinking  men  as  compared  with  the  diet  of  tem- 
perance men  is  the  real  cause  of  the  growth  of  the 
temperance  movement.  The  temperance  people  have 
now  a  great  economic  advantage  over  those  who  drink, 
and  this  advantage  must  gradually  increase  with  every 
change  in  the  consumption  of  the  American  people 
through  which  a  greater  use  is  made  of  cheap  food. 

Perhaps  what  I  mean  by  the  effect  of  our  economic 
environment  upon  the  consumption  of  the  American 
people  can  be  best  illustrated  by  the  changes  which  are 
now  taking  place  in  various  kinds  of  live-stock.  Hogs, 
sheep,  and  cattle  as  well  as  men  are  importations  from 
Europe,  but  these  animals  do  not  have  the  customs  and 
prejudice  of  men  to  overcome  before  they  can  be  ad- 
justed to  their  new  conditions.  There  has  been  a  rapid 
development  of  new  breeds,  especially  of  horses,  hogs, 
and  cattle,  through  which  animals  are  obtained  more 
fitted  for  American  conditions.  Especially  is  this  true 
of  the  hog.  The  Western  hog  is  a  different  animal 
from  that  found  elsewhere.  He  has  become  adjusted  to 
his  new  conditions  with  corn  as  his  food.  The  same 
effects  are  visible  in  cattle,  but  not  to  so  great  a  degree. 
The  difficulty  in  sheep-raising  lies  in  the  fact  that 
sheep  have  not  yet  become  adjusted  to  American  con- 
ditions. We  need  an  American  breed  of  sheep,  which 
can  stand  our  climate  and  eat  the  products  best  fitted 
for  American  soil. 

Even  in  the  color  of  our  clothing  there  must  be  great 


120      THE  ECONOMIC  BASIS  OF  PROTECTION. 

changes  made  before  our  adjustment  to  American  con- 
ditions is  complete.  The  conditions  of  soil  and  climate 
determine  the  color  best  fitted  for  use.  This  can  be 
plainly  seen  in  the  various  colors  used  by  railroad 
companies  in  painting  their  cars  and  buildings.  Each 
section  of  the  country  requires  a  different  color  to  en- 
able the  car  to  best  withstand  the  changes  in  heat  and 
climate  to  which  it  is  subjected.  Notice  also  the 
changes  which  have  been  made  in  painting  our  houses 
and  barns.  Formerly  white  was  regarded  as  the  only 
proper  color  for  a  dwelling.  White,  however,  is  the 
color  least  suited  to  the  dry,  dusty  climate  of  America, 
and  economy,  as  well  as  taste,  has  forced  the  American 
people  to  make  use  of  other  colors  more  adapted  to 
our  climatic  conditions.  Even  in  our  clothing  there 
must  be  a  gradual  diminution  in  the  amount  of  white 
which  we  wear.  The  use  of  wdiite  clothing  was  well 
suited  to  the  moist  climate  of  Europe  from  which  our 
ancestors  came  and  to  which  they  were  adjusted.  Our 
preference  for  white  is  a  result  of  these  conditions. 
Gradually,  however,  there  has  been  a  displacement  of 
white  by  other  colors  more  suited  to  American  con- 
ditions, and  in  the  end  all  our  white  garments  are 
likely  to  be  displaced  by  those  more  harmonious  to  our 
economic  surroundings. 

The  best  use  of  all  our  land  can  only  follow  more 
varied  consumption  on  the  part  of  the  American 
people.  There  are  now  immense  tracts  of  land  which 
cannot  be  utilized  because  the  American  people  do  not 
demand  the  crops  for  which  they  are  fitted.  So  long 
as  the  home  market  does  not  demand  any  other  articles 


THE  ECONOMIC  BASIS  OF  PROTECTION.      121 

for  food  than  those  staple  ones  to  which  our  ancestors 
in  Europe  were  adjusted,  there  can  be  but  little  use 
made  of  those  parts  of  our  country  for  which  wheat 
and  grazing  are  not  well  fitted.  At  present  our  popu- 
lation is  aggregated  in  those  regions  best  fitted  to  the 
production  of  the  cereals,  and  in  these  regions  only 
those  sections  are  well  cultivated  for  which  these  crops 
are  suited.  If  our  consumption  is  greatly  modified  so 
as  to  include  a  much  greater  variety  of  crops  suited 
to  American  soil,  centres  of  population  will  be  created 
in  new  regions  of  which  little  use  is  made  at  present, 
and  in  the  regions  now  occupied  the  introduction  of 
a  more  suitable  rotation  of  crops  will  add  greatly  to 
their  productivity. 

It  is  of  special  importance  to  point  out  how  our 
food-supply  may  be  greatly  increased  without  any 
addition  to  its  cost,  so  as  to  show  how  our  increasing 
population  may  be  supplied  with  food  without  bring- 
ing about  such  an  unequal  distribution  of  wealth  that 
will  stop  all  progress.  It  is  unfortunate  that  the 
American  people,  accepting  without  thought  a  European 
point  of  view,  should  rely  solely  upon  the  increase  of 
machinery  for  their  progress  and  not  upon  changes  in 
the  consumption  of  wealth.  In  reality  much  greater 
improvement  in  the  condition  of  the  American  people 
could  be  made  by  adjusting  our  consumption  to  Ameri- 
can conditions  than  by  all  the  machines  that  it  is  pos- 
sible to  devise.  It  certainly  was  a  great  improvement 
when  the  development  of  our  railroad  system  allowed 
the  use  of  the  Western  lands  for  wheat,  but  changes  in 
consumption  can  do  more  for  improving  the  condition 
f  11 


122      THE  ECONOMIC  BASIS   OF  PROTECTION. 

of  the  American  people  than  it  was  possible  to  obtain 
through  our  railroads.  The  productivity  of  our  soil 
when  used  for  crops  other  than  wheat  will  be  increased 
many  fold,  and  thus  increase  the  average  return  for 
labor,  even  though  there  is  a  rapid  increase  in  popula- 
tion. The  region  of  our  country  now  used  for  the  pro- 
duction of  tobacco  is  also  well  fitted  for  various  kinds 
of  fruit.  Suppose  the  American  people  should  change 
its  demand  from  tobacco  to  fruit  so  as  to  allow  the  use 
of  this  region  for  fruit  instead  of  tobacco,  what  a  great 
increase  there  would  be  in  the  productive  power  of  the 
nation  !  Beyond  a  doubt  ten  times  the  present  popula- 
tion could  be  supported  by  these  regions  if  the  land  were 
used  for  fruit  and  similar  crops  instead  of  tobacco. 

Suppose  further  there  should  be  a  change  in  the  de- 
mand of  the  people  from  whiskey  to  sugar.  The  same 
fields  from  which  corn  is  obtained  to  make  the  whiskey 
is  well  suited  for  sorghum  from  which  sugar  is  made. 
It  is  easy  to  see  how  great  would  be  the  increase  of 
productive  power  if  the  American  people  ceased  to 
demand  whiskey  and  in  its  place  put  a  diet  making  a 
free  use  of  sugar. 

If  all  these  considerations  are  properly  viewed  they 
show  how  great  must  be  the  changes  in  consumption 
before  the  American  people  are  really  adjusted  to 
American  conditions.  By  trying  to  remain  European 
and  holding  on  as  long  as  we  can  to  old  habits  and 
customs,  we  reduce  the  productivity  of  the  American 
soil  and  make  the  return  for  labor  much  lower  than  it 
might  be.  This  tenacious  holding  on  to  the  old  also 
has  a  marked  tendency  to  bring  the  American  nation 


THE  ECONOMIC  BASIS  OF  PROTECTION.      123 

prematurely  into  a  static  state,  in  which  the  people 
would  be  so  bound  down  by  habit  and  custom  that 
they  cannot  overcome  the  obstacles  which  stand  in  the 
way  of  the  best  use  of  the  soil.  While  these  tendencies 
remain  dominant  a  large  part  of  our  capital  and  labor 
is  wasted  by  opening  up  land  for  use  which  we  will 
not  want  when  we  become  better  adjusted  to  our  en- 
vironment. Much  of  the  poorer  land  of  the  Eastern 
States  never  would  have  been  opened  up  if  our  con- 
sumption of  food  was  in  harmony  with  American 
conditions.  The  light  soil  of  our  hills  is  often  better 
fitted  for  the  cereals  than  are  the  fertile  valleys  in 
the  same  regions.  As  a  result  the  poorer  soils  are 
those  now  mostly  used,  and  the  large  quantities  of  capi- 
tal and  labor  which  were  needed  to  bring  them  into 
use  will  be  a  total  loss  as  soon  as  other  crops  better 
fitted  for  the  valleys  are  demanded  by  the  people. 

American  civilization  has  before  it  a  series  of  prob- 
lems to  solve  before  all  food  products  can  become 
cheap.  The  crude  natural  production  of  which  we 
now  make  so  much  use  must  be  displaced  by  scientific 
production  in  one  region  after  another.  With  the 
increased  demand  for  any  article  produced  in  a  crude 
fashion  the  price  rises  until  the  inducements  are  so 
great  that  scientific  production  overcomes  the  obstacles 
in  its  way  and  displaces  crude  natural  production.  A 
passive  policy  on  the  part  of  the  people  cannot  prevent 
high  prices  of  crudely-produced  articles.  It  merely 
retards  the  change  to  scientific  production  and  lengthens 
the  period  of  high  prices.  It  would  be  a  great  saving 
in  the  end  if  an  active  policy  on  the  part  of  our  gov- 


124      THE  ECONOMIC  BASIS  OF  PROTECTION. 

ernment  should  raise  the  price  of  our  agricultural  prod- 
ucts now  crudely  produced  so  as  to  give  more  induce- 
ment to  scientific  production.  It  is  not  likely  that  the 
American  people  will  change  their  demand  for  food 
from  those  articles  produced  in  a  crude  fashion  to  other 
articles  better  fitted  for  the  soil  and  requiring  scientific 
production  until  the  present  price  of  these  articles  has 
been  greatly  increased,  either  through  the  action  of  the 
government  or  through  the  effect  of  an  increased  de- 
mand on  the  part  of  a  growing  population.  This  period 
of  high  prices  must  in  the  end  come,  and  it  is  for  the 
American  people  to  decide  whether  they  will  passively 
allow  an  unequal  distribution  of  wealth  to  force  the 
change  in  consumption  through  which  they  must  go, 
or  whether  they  will  by  a  wise  policy  hasten  this 
period  and  remove  those  obstacles  which  stand  in  the 
way  of  the  change. 

Every  increase  in  the  price  of  the  staple  articles  of 
consumption  hastens  modifications  in  consumption. 
Even  taxes  upon  these  articles  would  assist  in  our  de- 
velopment. These  taxes  would  fall  upon  the  less  pro- 
gressive part  of  the  community,  which  does  not  change 
its  consumption.  The  more  progressive  part  makes 
use  of  new  articles  better  suited  to  American  condi- 
tions, and  thus  not  only  avoids  the  taxes,  but  really 
increases  the  productivity  of  its  labor.  Taxes  on 
tobacco  and  liquors  are  of  particular  value  in  this 
respect,  and  have  done  much  towards  reducing  the 
use  not  only  of  these  articles,  but  also  the  whole  diet 
consumed  by  those  who  use  them. 

We  are  now  in  a  position  to  contrast  more  fully  than 


THE  ECONOMIC  BASIS  OF  PROTECTION.      125 

before  the  different  conceptions  presupposed  by  dynamic 
and  static  states  of  society.  The  latter  state  supposes  a 
steady  diminution  of  the  average  return  for  labor 
through  the  gradual  utilization  of  poorer  opportunities 
for  labor.  In  the  dynamic  society  the  temporary  high 
prices  of  single  articles  are  followed  by  such  changes  in 
consumption  and  production  that  will  lead  to  a  cheaper 
production  by  more  scientific  methods.  Each  wave  of 
high  prices  breaks  down  some  old  barriers  to  changes 
in  production  and  consumption  through  which  the 
better  adjustment  to  the  economic  conditions  of  the 
country  is  possible.  In  the  static  state  prices  rise 
slowly,  never  again  to  fdll  permanently.  In  the 
dynamic  state  prices  rise  more  quickly,  but  changes  in 
production  and  consumption  follow  through  which 
prices  are  again  reduced  to  a  lower  point  than  ever  be- 
fore. Through  a  long  period,  then,  the  tendencies  of 
these  two  social  states  are  exactly  opposite.  In  the 
static  state  there  is  a  steady  increase  in  the  price  of  all 
those  articles  which  are  likely  to  become  natural 
monopolies,  while  in  the  dynamic  state  these  articles, 
through  changes  in  consumption  and  production,  are 
steadily  reduced  in  price,  although  there  must  be 
periods  during  which  their  prices  are  high  in  order  to 
force  changes  in  production  and  consumption.* 

*  For  a  more  complete  discussion  of  the  principles  of  consump- 
tion, see  my  "  Consumption  of  Wealth." 


11* 


CHAPTER    XIII. 

THE   CRITERION  OF   EFFICIENT   PRODUCTION. 

It  is  the  aim  of  national  policies  and  the  desire  of 
the  people  to  make  labor  as  efficient  as  possible.  Some 
criterion  of  efficient  production  is  needed,  therefore,  by 
which  the  relative  advantage  of  different  modes  of 
production  can  be  tested.  The  usual  standard  is  that 
of  results  measured  in  price.  It  has  been  claimed  by 
Mill,  as  well  as  by  others  of  his  mode  of  thinking, 
that  the  power  of  underselling  is  an  unfailing  test  of 
the  efficiency  of  production,  and  that  it  implies  a  bet- 
ter economy  of  skill  and  indicates  a  greater  produce 
for  the  same  labor.  This  test,  however,  is  not  a  good 
one  except  in  a  static  state  of  society.  If  the  efficiency 
of  each  laborer  and  the  modes  of  production  are  fixed 
quantities,  then  the  adjustment  of  society  in  such  a  way 
that  cheapness  ensues  will  perhaps  lead  to  the  best  re- 
sults. As  soon,  however,  as  we  take  into  consideration 
a  society  in  a  dynamic  state  the  need  of  some  other 
test  becomes  plain.  In  such  a  society  we  cannot  ac- 
cept the  present  efficiency  of  the  various  classes  of 
laborers  as  a  permanent  quantity,  nor  can  we  regard  in 
the  same  way  the  productivity  of  land  and  other  natural 
resources.  All  of  these  elements  which  go  to  make  up 
the  total  production  are  constantly  changing,  and  we 
must  keep  in  mind  not  merely  the  present  state  of  pro- 
126 


THE  ECONOMIC  BASIS  OF  PROTECTION.      127 

duction  and  how  to  make  laborers  of  to-day  efficient, 
but  also  the  best  way  to  increase  the  productive  power 
of  labor  and  productive  capacities  of  land  and  other 
natural  resources. 

Cheapness  is  a  test  of  the  results  of  production,  while 
the  need  of  a  dynamic  state  is  a  test  of  the  power  to 
produce.  We  must,  however,  contrast  productive  power 
and  efficiency  so  as  to  find  an  adequate  test  for  each. 
Efficiency  is  to  be  measured  by  the  results  in  par- 
ticular industries,  productive  power  by  the  average  re- 
sult in  all  industries.  An  increase  of  productive  power 
implies  a  development  of  the  industrial  qualities  of  the 
nation  or  the  utilization  of  the  greater  part  of  them. 
The  society  uses  more  skill,  intelligence,  forethought, 
capital,  and  other  like  indications  of  a  higher  intelli- 
gence, but  this  higher  intelligence  applied  to  the  various 
industries  does  not  give  a  like  increased  return  in  all 
of  them.  A  given  increase  in  productive  power  may 
result  in  a  very  large  increase  in  efficiency  in  one  in- 
dustry and  a  very  small  increase  in  another.  We  must 
judge  the  productive  power,  therefore,  by  the  average 
increase  in  the  industry  of  the  whole  nation,  and  not 
as  we  judge  efficiency  by  the  increase  in  particular  in- 
dustries. Productive  power  cannot  be  tested  by  the 
results  in  particular  industries,  because  in  any  given 
industry  the  results  from  an  increase  in  productive 
power  may  not  be  manifest.  Productive  power  is  a  con- 
sequence of  the  general  intelligence  of  society  and  is  to 
be  judged  by  the  civilization  of  the  people.  Civiliza- 
tion causes  intelligence,  and  intelligence  gives  produc- 
tive  power.     If  this   reasoning  is   correct,   then   the 


128      THE  ECONOMIC  BASIS  OF  PROTECTION. 

skill  and  intelligence  of  the  people — in  other  words, 
their  civilization — is  a  much  better  test  of  the  efficiency 
of  their  production  than  is  the  cheapness  of  the  com- 
modities they  produce. 

An  increase  of  productive  power  does  not  show  itself 
in  prices  unless  it  adds  more  to  the  efficiency  of  labor  in 
one  industry  than  in  another.  Prices  will  not  fall  if 
wages  rise  as  rapidly  as  the  increase  of  productive 
power  permits.  If  all  commodities  are  produced  with 
fifteen  per  cent,  less  labor,  prices  would  not  be  altered. 
If,  however,  with  the  same  average,  one  part  requires 
twenty  per  cent.,  and  the  other  ten  per  cent.,  less  labor, 
the  former  falls  in  value  ten  per  cent.  Cheapness, 
therefore,  merely  shows  the  differences  in  the  increase 
of  productive  power,  not  its  full  increase. 

With  a  higher  civilization  some  of  the  articles  pro- 
duced will  have  a  higher  price,  but  productive  power 
as  a  whole  is  so  much  increased  that  a  greater  quan- 
tity of  products  can  be  secured  by  the  people  even  if 
the  price  is  higher.  Some  articles  will  have  a  higher 
price  because  an  increase  in  productive  power  of  a  na- 
tion does  not  increase  the  efficiency  of  the  labor  to  a 
like  degree  in  all  industries.  With  every  increase  of 
productive  power  there  is  a  change  of  the  relative 
efficiency  of  different  industries.  At  one  stage  in  a 
nation's  development  the  efficiency  of  labor  in  par- 
ticular industries  increases  very  rapidly,  while  it  re- 
mains stationary  in  other  departments.  In  one  stage 
of  its  development  the  efficiency  of  labor  in  the  produc- 
tion of  cotton  goods  may  double,  while  in  iron  or  silk 
there  may  be  little  change.     At  a  second  increase  of 


THE  ECONOMIC  BASIS  OF  PROTECTION.      129 

productive  power  during  another  period  the  efficiency 
of  labor  in  producing  iron  may  rapidly  increase,  while 
silk  and  cotton  will  change  but  little.  Now  comes  a 
third  period  in  which  perhaps  the  increase  of  produc- 
tive power  will  show  its  effect  in  the  production  of 
silk,  and  the  efficiency  of  the  laborers  producing  silk 
will  increase  rapidly,  while  that  of  workmen  employed 
in  other  occupations,  even  though  having  a  greater  pro- 
ductive power  as  a  whole,  will  not  be  materially  changed. 
To  illustrate,  let  us  suppose  that  a  society  is  going 
through  a  series  of  industrial  transitions,  and  that 
in  changing  from  the  one  industrial  stage  to  another 
the  increase  in  productive  power  is  fifteen  per  cent. 
We  will  further  suppose  that  in  changing  from  the  first 
to  the  second  stage  judged  by  the  efficiency,  the  labor 
producing  article  A  increases  in  efficiency  five  per  cent., 
in  the  article  B  ten  per  cent.,  C  fifteen  per  cent.,  D 
twenty  per  cent.,  E  twenty-five  per  cent., — thus  mak- 
ing the  average  increase  fifteen  percent.  In  the  second 
stage,  therefore,  the  articles  A  and  B  will  have  a  higher 
price  than  before,  C  will  have  the  same  price,  while  D 
and  E  will  have  a  lower  price.  Notice  that  this  in- 
crease in  productive  power  would  place  the  nation  at  a 
disadvantage  in  producing  the  articles  A  and  B,  while 
it  would  increase  their  advantage  in  producing  D  and 
E.  Suppose  now  another  like  increase  in  productive 
power  through  which  the  efficiency  of  the  labor 
producing  A  is  increased  forty  per  cent,  above  what  it 
was  in  the  first  stage  of  industrial  progress,  B  twenty 
per  cent.,  C  thirty  per  cent.,  D  twenty-five  per  cent.,  E 
thirty  per  cent., — thus  making  a  second  average  increase 


130      THE  ECONOMIC  BASIS  OF  PROTECTION. 

of  fifteen  per  cent.  The  article  A  would  now  have  a 
lower  price  than  in  the  first  industrial  stage,  C  and  E 
the  same  price,  while  B  and  D  would  be  dearer  than  at 
first.  In  the  second  stage  the  nation  was  at  a  disad- 
vantage in  producing  A  and  B,  while  in  the  third 
stage  the  nation  is  at  a  disadvantage  in  producing 
B  and  D,  arising  from  the  fact  that  the  increased 
productive  power  when  applied  to  these  articles  does 
not  give  as  great  results  as  in  the  production  of  other 
commodities.  During  the  second  stage  the  nation 
would  have  an  advantage  of  producing  D  and  E,  while 
in  the  third  stage  the  advantage  would  be  greatest  in 
producing  A.  In  other  words,  the  change  from  the 
second  to  the  third  stage  would  change  the  direction 
of  the  labor  of  the  nation  from  D  and  E  to  A. 
Although  in  each  higher  stage  some  articles  are  dearer 
than  before,  yet  as  the  productive  power  has  been  in- 
creased there  has  been  as  a  whole  a  gain  by  the  people, 
and  more  products  can  be  obtained  by  the  average 
citizen. 

Perhaps  my  thought  can  be  more  clearly  seen  from 
the  following'  table : 


Per   Cent,  of 
Average  In- 
crease. 

I. 

II. 

III. 

IV. 

V. 

VI. 

15 

30 

45 

60 

75 

A.   .    .    . 
B  .    .    .    . 
0  .   .   .   . 
D.    .    .    . 
E  .   .    .    . 

100 
100 
100 
100 
100 

105— 

i  io- 
ns 

120 
125 

140 

120— 
130 
125— 
130 

145 

160 
135— 
140— 
145 

150— 

170 

165 

160 

155— 

175 

180— 

170 

185 

165— 

THE  ECONOMIC  BASIS  OF  PROTECTION.      \%\ 

In  this  table  the  numerals  refer  to  the  successive 
stages  in  industrial  progress,  in  each  of  which  the  pro- 
ductive power  has  increased  fifteen  per  cent.  The 
letters  refer  to  different  articles  produced  by  the  labor 
of  the  nation.  In  the  first  stage  the  productive  power 
of  the  nation  in  each  article  is  placed  at  one  hundred 
per  cent,  as  a  basis,  and  the  increase  in  productive 
power  in  various  subsequent  stages  can  be  seen  from 
the  table  by  observing  what  increase  in  the  power  of 
producing  this  commodity  takes  place  in  each  of  the 
stages.  Notice  how  the  efficiency  of  labor  as  applied 
to  the  production  of  different  commodities  varies  with 
each  industrial  stage.  These  changes  must  continually 
take  place  as  long  as  there  is  an  increase  in  the  produc- 
tive power,  because  each  increase  of  productive  power 
has  unlike  results  in  different  occupations.  To  show 
more  clearly  in  what  commodities  the  labor  in  each 
stage  is  at  a  disadvantage,  I  have  placed  a  minus  sign 
after  those  articles  in  each  column  where  the  labor 
is  relatively  least  productive.  In  this  way  it  can  be 
seen  that  during  the  five  stages  each  article  is  twice 
produced  at  a  disadvantage ;  thus  showing  very  clearly 
the  enormous  force  exerted  in  a  dynamic  state  to  change 
labor  from  one  occupation  to  another. 

Suppose,  further,  we  take  two  societies,  one  of  which 
remains  static  in  the  first  stage  while  the  second  is 
dynamic  and  advances  through  the  several  stages  I 
have  indicated.  At  each  stage  some  articles  would  be 
cheaper  in  the  static  society  than  in  the  dynamic  one, 
and  as  a  result  there  would  be  a  tendency  to  cease  pro- 
ducing these  articles  in  the  dynamic  society.     At  every 


132      THE  ECONOMIC  BASIS  OF  PROTECTION. 

stage  in  the  industrial  development,  however,  the  new 
articles  become  the  cheap  articles,  and  others  which 
were  cheap  become  the  dear  articles.  If  exchanges 
should  take  place  between  the  two  societies  the  labor 
of  the  dynamic  society  would  now  be  forced  into  new 
occupations,  and  the  labor  and  capital  expended  in  de- 
veloping the  industries  whose  products  are  now  rela- 
tively dear  will  be  a  loss  to  that  society.  There  would 
then  be  a  continual  loss  in  capital  and  skill  of  pro- 
ducers through  ceasing  to  produce  certain  articles,  and 
another  serious  loss  through  removing  the  obstacles 
needed  to  produce  the  new  commodities  for  which  their 
labor  is  now  efficient ;  yet  at  the  next  industrial  stage 
these  articles  which  they  have  ceased  to  produce  will 
perhaps  be  those  for  which  their  labor  will  be  most 
productive ;  since  the  increase  in  productive  power  may 
add  much  more  to  the  efficiency  of  the  production  of 
these  articles  than  to  that  of  other  articles.  In  this  case 
the  expense  of  reintroducing  these  industries  must  be 
borne  a  second  time,  and  there  would  also  be  an  ad- 
ditional loss  resulting  from  taking  labor  and  capital 
from  the  industries  of  the  preceding  stage  into  those 
of  the  next  stage. 

If  we  accept  cheapness  as  a  criterion  of  efficiency,  in 
the  second  stage  A  drops  out  to  reappear  in  the  third, 
in  the  second  stage  D  drops  out  to  reappear  in  the 
fourth,  while  in  the  fourth  stage  C  drops  out  to  re- 
appear again  in  the  fifth. 

From  these  facts  it  will  be  seen  that  for  a  nation 
passing  through  a  series  of  dynamic  stages,  different 
considerations  must  form  the  part  of  a  good  national 


THE   ECONOMIC  BASIS  OF  PROTECTION.      133 

policy  than  if  a  nation  remained  static  in  any  one  stage. 
The  people  must  estimate  not  merely  the  present  effi- 
ciency of  their  labor,  but  also  the  losses  and  gains  which 
will  come  to  them  in  passing  from  one  industrial  stage 
to  another.  They  must  keep  in  mind  also  that  an  in- 
dustry which  is  at  a  disadvantage  in  one  stage  of 
progress  will  often  be  the  place  where  their  labor  is 
most  efficient  in  subsequent  stages. 

There  is  also  an  additional  reason  why  a  dynamic 
nation  should  keep  alive  those  industries  where  its 
labors  are  at  a  disadvantage.  The  more  mechanical 
industries  for  which  a  low  class  of  labor  is  better  fitted 
are  likely  to  go  to  the  lower  civilization  ;  yet  the  more 
mechanical  an  industry  is  the  more  likely  is  it  that  in- 
ventions will  be  discovered  by  which  it  will  change  to 
an  industry  fitted  for  the  higher  civilization.  As  capi- 
tal and  skill  are  constantly  displacing  crude  labor,  the 
cruder  the  form  of  production  the  more  likely  is  it 
that  in  the  next  stage  of  the  industrial  development  of 
the  nation  this  industry  will,  through  inventions  and 
improvements,  be  changed  into  one  requiring  a  large 
quantity  of  capital  and  much  skill  on  the  part  of  the 
laborers.  Thus  the  industries  into  which  the  higher 
civilization  can  with  advantage  put  its  labor  in  the 
next  industrial  stage  are  likely  to  be  those  in  which 
the  lower  civilizations  now  put  their  labor.  On  this 
account  there  is  a  great  difficulty  in  changing  the  in- 
dustries as  a  nation  advances,  because  the  industries 
into  which  its  labor  should  go  are  now  the  industries 
of  distant  lands.  Through  this  advance  sugar  must 
change  from  Cuba  to  Germany,  nails  from  England  to 

12 


134      THE  ECONOMIC  BASIS  OF  PROTECTION. 

Pittsburg,  cotton  goods  from  India  to  England,  linen 
goods  from  Holland  to  Ireland,  silk  from  China  to 
France,  and  ships  from  Maine  to  the  river  Clyde. 

If  the  labor  of  a  nation  is  devoted  to  a  few  occupa- 
tions there  is  a  bar  to  its  development  into  a  higher 
industrial  stage,  because  its  labor  must  be  changed  into 
occupations  so  different  from  those  in  which  the  laborers 
are  now  placed.  This  is  to  be  seen  in  the  present  con- 
dition of  the  South.  It  is  now  changing  from  one  in- 
dustrial stage  to  another,  and  as  a  result  its  labor  will 
have  to  be  transferred  from  the  present  leading  occupa- 
tions to  new  ones.  Sugar,  tea,  and  silk,  wool  and 
iron,  are  to  be  the  industries  of  the  South  at  no  distant 
period  ;  yet  all  these  industries  are  now  located  in  dis- 
tant lands  and  cannot  be  easily  domesticated.  It  is 
even  difficult  to  convince  Americans  that  the  rapidly- 
increasing  intelligence  of  the  South  makes  new  occu- 
pations desirable.  So  firmly  have  free-trade  notions 
become  rooted  in  their  modes  of  thinking,  that  they 
are  led  to  suppose  that  the  actual  industries  of  the  na- 
tion are  those  in  which  its  labor  is  most  productive. 
Very  likely  the  production  of  cotton  was  the  most  effi- 
cient industry  of  the  South  during  the  period  of  slavery, 
but  the  new  conditions  of  the  South,  the  rapid  increase  in 
the  intelligence  of  its  people  and  the  increase  of  its  capital 
are  bringing  about  an  industrial  revolution  which  will 
change  the  relative  advantage  of  its  leading  industries. 

The  cost  of  an  advancing  civilization  shows  itself 
in  the  price  of  single  articles.  If  it  requires  more  skill 
to  produce  B  than  A,  the  industrial  qualities  needed  to 
produce  B  when  applied  to  A  will  cheapen  it.     If  pro- 


THE  ECONOMIC  BASIS  OF  PROTECTION.      135 

ducing  C  requires  still  more  skill,  its  production  will 
in  a  like  manner  cheapen  A  and  B.  The  new  indus- 
tries of  a  progressive  nation  thus  seem  to  be  a  burden, 
because  a  higher  price  is  needed  to  develop  the  superior 
skill  required  to  make  commodities  in  a  new  way,  yet 
when  this  skill  is  also  applied  to  the  old  industries  the 
gain  in  them  far  exceeds  the  loss  from  the  temporary 
high  prices  in  the  new  industries. 

If  a  nation  in  a  dynamic  state  keeps  its  industrial 
development  harmonious,  labor  and  capital  can  easily 
pass  into  new  industries  where  the  increase  of  produc- 
tive power  makes  it  most  efficient.  In  this  way  its 
advance  becomes  regular  and  certain,  and  it  moves 
much  more  rapidly  along  the  course  of  its  industrial 
development  than  would  be  possible  if  it  accepted 
cheapness  as  a  criterion  of  industrial  efficiency  and 
allowed  its  labor  to  become  concentrated  in  a  few  in- 
dustries, out  of  which  it  could  not  be  taken  without 
great  trouble  and  expense.  The  prominent  injury  of 
free-trade  arises  from  its  tendency  to  force  the  labor  of 
each  nation  into  a  few  industries.  The  productive 
power  of  a  nation  cannot  increase  very  rapidly  while 
its  labor  is  employed  in  so  narrow  a  scope.  In  any 
industry  but  few  industrial  qualities  are  called  into 
activity,  and  the  productive  power  of  a  nation  which 
relies  solely  on  a  few  industries  is  relatively  small. 
The  nation  can  sell  cheaply,  but  its  laborers  have  so 
little  productive  power  that  they  cannot  buy  much 
even  of  what  is  cheap.  Free-trade  may  reduce  the 
price  of  some  commodities,  but  it  reduces  productive 
powerso  much  more  rapidly  that  the  people  sufferfrora  it. 


CHAPTER    XIV. 

SHALL  THE   IDEAL   OF    AMERICAN   CIVILIZATION   BE 
NATIONAL   OR    COSMOPOLITAN  ? 

From  the  earliest  times  until  within  the  eighteenth 
century  the  development  of  the  world  moved  along 
national  lines.  Each  nation  was  to  a  large  degree 
isolated  from  the  others,  and  whatever  development 
took  place  within  it  was  passed  over  to  other  nations 
very  slowly  if  at  all.  In  this  way  each  nationality  had 
concrete  ideas  and  a  spirit  of  opposition  to  the  other 
nations  which  retarded  to  a  large  degree  the  progress 
of  the  world.  During  the  eighteenth  century,  how- 
ever, there  grew  up  another  type  of  thinking.  The 
ties  of  nationality  ceased  to  have  their  original  force, 
and  many  persons  thought  to  set  aside  entirely  all  those 
marks  and  characteristics  which  showed  them  to  be 
natives  of  particular  localities,  and  would  have  them- 
selves regarded  as  citizens  of  the  world  rather  than  oi 
their  own  nation.  They  would  choose  the  best  charac- 
teristics from  each  nationality,  and  in  this  way  hoped 
to  blend  into  a  new  whole  a  type  of  man  which  would 
incorporate  within  itself  all  the  higher  characteristics 
of  each  race.  This  change  in  tone  had  a  great  influence 
upon  the  civilization  of  the  eighteenth  century  and 
brought  with  it  many  advantages.  It  helped  to  make 
the  nations  known  to  one  another  and  to  incorporate  >n 
136 


THE  ECONOMIC  BASIS  OF  PROTECTION.      137 

each  nationality  some  of  the  good  features  of  other 
nations. 

Soon,  however,  this  feeling  settled  down  into  a 
species  of  dogmatism.  Its  advocates  upheld  definite 
dogmas  which  they  regarded  better  than  any  other. 
They  were  without  any  historical  sense,  and  thought 
their  own  ideas  were  not  merely  better  for  themselves 
but  also  better  for  all  times,  conditions,  and  societies, 
and  that  the  views  they  held  and  their  mode  of  living 
and  acting  should  be  impressed  upon  all  other  races 
and  localities,  no  matter  what  their  stage  of  develop- 
ment. Types  of  men  not  fitted  for  this  statical  state 
would  be  ground  out  of  existence  by  competition,  and 
thus  the  whole  civilized  world  blended  into  one  united 
■whole  with  definite  ideas,  doctrines,  and  modes  of 
living. 

This  species  of  cosmopolitanism  grew  out  of  the  dog- 
matism of  the  last  century  before  the  educated  classes 
were  influenced  by  the  later  developments  of  economic, 
sociological,  and  biological  knowledge.  During  this 
century  there  has  been  a  reaction  against  this  cosmo- 
politan feeling,  and  in  almost  every  nation  there  has 
arisen  a  new  type  of  thinkers  who  strive  to  have  their 
civilization  become  more  closely  adjusted  to  the  peculiar 
conditions  of  its  own  environment.  This  is  not  a  wish 
to  restore  the  old  type  of  civilization.  They  see  the 
errors  in  the  old  national  feeling  as  clearly  as  do  their 
opponents.  It  is  not  provincialism  that  they  wish,  but 
real  nationalism.  Provincialism  includes  a  hostility 
to  other  nationalities  and  the  desire  to  cling  to  that 
which  has  grown  up  within  its  narrow  bounds.     It  is 

12* 


138      THE  ECONOMIC  BASIS  OF  PROTECTION. 

also  a  static  conception,  and  would  hold  each  locality 
to  those  ideas  and  modes  of  living  which  they  have 
acquired  from  past  times.  Nationalism,  on  the  con- 
trary, is  a  dynamic  movement,  and  seeks  to  bring  each 
nation  through  a  series  of  changes  and  developments 
that  would  bring  a  better  harmony  between  its  social 
conditions  and  its  economic  environment.  It  assumes 
that  each  nationality  through  diiferences  of  climate, 
soil,  and  other  natural  conditions  has  an  economic  en- 
vironment peculiar  to  itself  to  which  a  particular  type 
of  man  is  best  adjusted,  and  that  a  series  of  nations  of 
different  types,  each  fitted  to  its  own  environment,  will 
make  a  better  use  of  the  world  and  reach  a  higher  civi- 
lization as  a  whole  than  any  one  type  could  if  it  en- 
deavored to  occupy  the  whole  world  and  retain  the 
common  characteristics.  This  type  in  reality  would 
be  adjusted  to  the  conditions  of  some  one  locality  only, 
and  in  other  regions  its  adjustment  would  be  so  meagre 
that  the  civilization  would  necessarily  take  a  low  form 
and  make  a  poor  use  of  the  natural  resources  around 
it.  On  the  contrary,  adjust  the  people  of  each  nation 
to  its  own  environment  and  mankind  will  be  better 
adjusted  to  natural  conditions  of  the  whole  world  than 
in  any  other  way. 

Nationalism  tends  to  adjust  the  people  of  a  nation  more 
closely  to  their  environment  and  thus  develop  all  its 
natural  resources.  Its  inhabitants  learn  to  enjoy  those 
pleasures  which  the  environment  can  best  offer  and  to 
live  on  those  kinds  of  food  which  can  be  procured  most 
cheaply.  It  is  a  dynamic  movement  bringing  organic 
changes  into  the  nation   with  each  development  of  its 


THE  ECONOMIC  BASIS  OF  PROTECTION.      139 

environment.  The  nation  is  kept  organically  together 
in  its  development,  but  at  the  same  time  the  influence 
of  the  environment  is  so  prominent  that  any  change  in 
it  makes  a  corresponding  change  in  the  organic  whole 
of  the  nation.  Cosmopolitanism,  however,  overlooks 
the  need  of  this  adjustment  to  objective  conditions  and 
tends  to  adjust  man  more  closely  to  a  particular  social 
condition  and  to  cut  off  those  portions  of  society  lack- 
ing the  dominant  traits.  It  stops  differentiation  and 
presses  the  nation  into  a  fixed  social  state.  It  blends 
into  a  chemical  whole  the  body  of  thought  and  charac- 
teristics peculiar  to  the  nationality.  It  throws  around 
the  nation  strong  bonds  from  which  it  is  hard  to  break 
and  thus  results  in  a  statical  state. 

A  national  ideal  is  not  opposed  to  the  general  good 
of  the  whole  world.  If  each  nation  makes  the  best 
use  of  its  own  land  and  of  its  own  resources  the  whole 
world  will  be  utilized  to  the  fullest  degree.  Each  na- 
tion is  also  more  useful  to  its  neighbors  if  its  resources 
are  put  to  the  best  use  than  if  its  land  and  resources  were 
used  in  a  way  subordinating  its  nationality  to  that  of 
some  other  nation.  The  land  of  India,  for  example, 
being  better  fitted  for  rice  than  for  wheat,  the  utility 
of  India  to  the  whole  world  is  much  greater  if  its  re- 
sources are  developed  by  its  own  people  and  its  land 
used  in  a  way  most  useful  to  them,  than  if  the  whole 
country  were  turned  into  a  wheat-field  for  the  benefit 
of  distant  lands.  As  a  wheat-field,  India  would  doubt- 
less be  of  considerable  use  to  other  nations,  but  its 
utility  to  them  and  the  commerce  that  it  would  have 
with  them  would  be  much  greater  if  its  land  is  used  to 


140      THE  ECONOMIC  BASIS  OF  PROTECTION. 

support  its  own  people  than  if  it  were  used  merely  to 
raise  wheat.  As  long  as  the  land  of  one  nation  is  used 
directly  to  support  the  people  of  another  nation  only 
the  lowest  forms  of  commerce  and  the  crudest  material 
will  be  a  part  of  the  trade  with  other  nations.  This 
form  of  commerce  ceases  when  the  land  of  a  nation  is 
used  to  support  its  own  people,  but  as  new  forms  of 
commerce  develop  and  in  articles  of  greater  value  and 
utility,  the  total  commerce  is  much  greater  than  it 
otherwise  would  be.  Commerce  increases  with  na- 
tional prosperity,  and  whatever  gives  prosperity  to  each 
individual  nation  increases  the  prosperity  of  the  whole 
world.  The  value  of  American  trade  to  Europe  has 
increased  just  in  proportion  as  the  American  people 
have  used  their  land  to  support  themselves.  Ameri- 
can trade  is  now  much  more  valuable  to  Europe  than 
if  it  were  a  series  of  Irelands  furnishing  them  with 
food. 

There  are  particular  reasons  why  America  should 
make  a  national  movement  its  ideal  rather  than  try  to 
blend  its  civilization  into  a  common  form  with  that  of 
Europe.  Our  opportunities  for  development  and 
progress  are  much  more  favorable  than  those  of  Europe, 
and  we  can  develop  into  a  higher  civilization  much 
more  rapidly  than  it  is  possible  for  them  to  do.  Share 
with  them,  and  our  progress  must  be  as  slow  as  theirs  ; 
isolate  ourselves  from  them,  and  our  new  soil  and 
great  natural  resources,  coupled  with  the  activity  of 
our  people,  will  push  us  rapidly  into  a  higher  social 
state,  where  many  of  our  present  economic  difficulties 
will  disappear.     When  we  have  reached  this  national 


THE  ECONOMIC  BASIS  OF  PROTECTION.      141 

ideal  and  adjusted  ourselves  to  our  environment  our 
civilization  will  be  easily  propagated  in  other  lands, 
and  thus  our  national  progress  in  the  end  means  the 
progress  of  the  whole  world.  Just  as  the  successful 
development  of  American  political  ideas  quickly  swept 
all  before  them  throughout  Europe,  so  a  higher 
economic  system  once  put  into  successful  operation 
in  America  would  have  little  difficulty  in  finding 
imitators  all  over  the  world.  All  the  parts  of  such 
a  system  must  develop  together  so  as  to  enlarge 
our  productive  power  sufficiently  to  supply  our  more 
urgent  wants.  It  will  not  be  possible  for  us  to  create 
a  higher  civilization  and  rely  solely  upon  the  develop- 
ment of  a  few  industrial  qualities  as  a  basis  of  this 
civilization.  A  new  civilization  means  the  develop- 
ment of  new  industrial  qualities  harmoniously  united 
with  those  we  now  have.  It  also  means  new  tastes 
and  habits  through  which  a  new  order  of  consumption 
is  formed  and  a  better  adjustment  to  our  food-supply 
made  possible.  When  we  reach  this  new  equilibrium 
in  harmony  with  American  conditions,  then  and  only 
then  can  we  expect  to  exert  a  commanding  influence 
upon  the  development  of  the  other  nations,  and  force 
them  to  break  away  from  their  present  economic  con- 
ditions and  adjust  themselves  to  a  higher  social  state. 
If  we  show  the  world  how  a  people  can  become  edu- 
cated, how  skilled  labor  can  be  placed  and  maintained 
in  all  industries,  how  the  consumption  of  the  people 
can  be  modified  so  as  to  make  the  best  use  of  its  land, 
and  how  all  forms  of  internal  improvements  can  be 
successfully  inaugurated  and  carried  out,  other  nations 


142      THE  ECONOMIC  BASIS  OF  PROTECTION. 

will  be  compelled  to  follow  in  our  footsteps  and  dis- 
place that  mass  of  cheap  laborers  which  now  retards 
the  development  of  every  nation.  Just  as  English 
isolation  from  the  Continent  developed  new  industrial 
conditions  so  superior  to  those  of  the  Continent  that  in 
the  end  other  nations  were  forced  to  adopt  them,  so  a 
national  policy  in  America  can  develop  a  still  higher 
industrial  state,  and  thus  compel  other  nations  to  make 
use  of  the  same  means  in  their  development. 

Do  not  forget,  however,  that  this  development  must 
be  an  organic  whole  and  that  a  new  equilibrium  must 
be  obtained  before  our  influence  can  be  fully  exerted. 
There  is  not  enough  difference  between  three-eighths 
and  seven-sixteenths  of  a  solution  of  our  economic  dif- 
ficulties to  make  it  for  the  advantage  of  the  whole 
world  that  we  should  immediately  divide  up  the  results 
of  every  industrial  advance  with  other  nations.  Better 
let  them  accumulate  in  America  until  we  solve  prob- 
lems of  a  higher  civilization,  and  then  the  propagation 
of  results  will  be  much  easier.  Our  success  will  thus 
become  the  success  of  the  whole  world.  In  this  respect 
the  example  of  England  should  be  followed.  She  did 
not  give  up  her  isolation  until  her  industrial  superiority 
over  that  of  Continental  nations  had  been  established 
in  every  leading  industrial  line.  So  great  has  been 
her  supremacy  that  as  yet  no  other  nation  has  been 
able  to  displace  her,  even  though  they  have  diligently 
sought  to  domesticate  English  methods  of  production. 
If  we  add  to  the  skill  of  our  laborers,  make  a  greater 
use  of  capital  and  join  with  this  in  an  organic  whole 
all  that  a  higher  education  can  give,  we  can  then  reap 


THE  ECONOMIC  BASIS  OF  PROTECTION.      143 

as  great  an  advantage  from  commerce  as  England  is 
now  doing. 

To  accomplish  these  results  an  active  policy  should 
not  be  confined  to  a  tariff.  We  must  broaden  the  lines 
of  our  national  activity  if  we  would  secure  the  best 
results  with  the  least  effort.  Internal  improvements 
are  of  special  importance,  and  the  industrial  develop- 
ment of  the  South  needs  particular  encouragement. 
The  key  to  national  prosperity  lies  in  Southern  pros- 
perity. The  South  is  the  natural  market  of-  the  West, 
and  until  its  resources  have  been  developed  so  that  it 
becomes  the  market  for  Western  produce,  the  West 
itself  cannot  have  that  prosperity  which  its  superior 
natural  conditions  should  give  it.  Educational  activity 
is  also  of  prime  importance.  A  broader  education  is 
needed  to  show  Americans  how  to  adjust  themselves  to 
American  conditions.  There  is  a  special  need  of 
manual  training  by  which  the  efficiency  of  each  indi- 
vidual laborer  will  be  increased  more  rapidly.  So  far 
in  the  development  of  American  industry  we  have  re- 
lied almost  wholly  upon  machines,  capital,  and  shrewd 
managers  to  obtain  our  industrial  success.  The  de- 
velopment resulting  from  these  causes  has  been  remark- 
able ;  yet  a  still  more  remarkable  development  might 
be  obtained  if  each  individual  laborer  should  have  his 
efficiency  increased  as  fully  as  a  manual  education 
would  allow.  Money  spent  by  the  nation  in  increasing 
the  skill  and  intelligence  of  the  people  is  the  most 
efficient  means  of  leading  to  an  adjustment  to  the  new 
conditions  of  the  country.  Whatever  obstacles  to 
economic  progress  the  nation  must  overcome  to  reach  a 


144      THE  ECONOMIC  BASIS  OF  PROTECTION. 

higher  civilization  can,  with  the  aid  of  an  education, 
be  overcome  with  less  protection,  and  the  period  of 
protection  will  also  be  shortened. 

It  is,  however,  unwise  to  set  a  definite  limit  to  tl*e 
period  of  national  development  through  which  a  protec- 
tive policy  is  advantageous.  With  a  higher  ideal  of  the 
future  of  America  the  initial  period  preparing  for  its 
realization  is  extended.  The  greater  and  grander  our 
civilization  is  to  become,  the  longer  must  be  the  dynamic 
movement  which  will  bring  us  into  it.  The  error 
of  free-traders  lies  in  their  low  ideal.  They  judge  we 
have  almost  reached  the  limit  of  our  progress,  and  hence 
our  economy  should  conform  to  a  static  ideal.  The 
mistake  they  are  making  is  similar  to  that  of  Colum- 
bus. He  wras  right  in  thinking  that  by  sailing  west- 
ward he  could  reach  Asia.  He  was  wrong  in  his  esti- 
mation of  the  distance  and  the  obstacles  in  the  way. 
On  the  economic  chart  of  Adam  Smith  his  Asia  almost 
touched  the  shores  of  Europe.  In  a  few  days'  sailing 
he  hoped  our  civilization  would  reach  its  goal  and 
ideal.  While  the  discovery  of  vast  seas  and  unknown 
Americas  makes  our  Asia  more  distant  than  ever,  it 
has  to  a  corresponding  degree  increased  the  possibilities 
of  our  development.  We  live  in  a  larger  and  better 
world  than  our  fathers  supposed,  yet  we  must  work 
harder  and  longer  if  we  are  to  become  a  nation  which 
can  master  its  difficulties  and  secure  its  rewards. 

THE   END. 

Printed  by  J.  B.  Lippincott  Company,  Philadelphia. 


BY    THE    AUTHOR    OK   THIS    VOLUME. 

THE   PREMISES 

OF 

Political  Economy. 

By  SIMON  N.  PATTEN,  Ph.D.  (Halle), 

PROFHSSOR  OF  POLITICAL   ECONOMY   IN  THE  UNIVERSITY   OF    PENNSYLVANIA. 

12mo.      Cloth.      Price,   $l.SO. 


TESTIMONIALS. 

From  the  Boston  Beacon. 
"  Clergymen,  students  of  society,  men  and  women  of  the  world,  whoever 
has  a  heart  and  any  interest  in  the  dismal  science  of  wealth,  should  not  fail  to 
read  Patten's  '  Premises  of  Political  Economy.'  " 

From  the  Chicago  Inter-Ocean. 
"  A  modest,  but  powerful  treatise.    In  its  line,  it  is  one  of  the  marked  books 
of  the  season,  and  to  the  student  of  the  deep  and  vital  questions  of  economics 
it  must  be  highly  valuable." 

From  the  New  York  Independent. 
"  The  best  thing  in  the  book  is  an  important  objection  to  the  law  of  ground- 
rents  as  started  by  Ricardo.  .  .  .  By  following  this  analysis  out  completely, 
we  see  how  Carey  and  Ricardo  each  seized  upon  a  half-truth  ;  the  two  being 
apparently,  but  not  really,  inconsistent  with  one  another.  This  is  admirable, 
and  shows  our  author  at  his  best.  His  theory  of  the  '  limited  return'  from  land 
is  almost  as  good." 

From  the  New  York  Critic. 
"  While  free-trade  forms  directly  the  subject  of  only  one  chapter  out  of 
eight,  the  argument  of  the  whole  book  is  directed  against  that  let-alone  policy 
which  has  reigned  supreme  in  the  English  school  of  political  economy,  and  of 
which  free-trade  is  only  the  most  conspicuous  application.  .  .  .  Whatever  we 
may  think  of  the  doctrine  of  laissez  /aire,  of  the  policy  of  protection,  the 
originality  and  ability  of  the  work  before  us  cannot  be  questioned.  It  contains 
almost  the  only  cogent  and  weighty  arguments  against  the  doctrines  of  Ricardo 
and  Malthus  that  we  have  seen." 


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BY    THE    AUTHOR    OF    THIS    VOLUME. 
PUBLISHED  BY  AMERICAN  ECONOMIC  ASSOCIATION. 

The  Stability  of  Prices. 

VOL.  III.     No.  6.       Paper,  78  Cents. 

"  In  the  present  monograph  he  (Prof.  Patten)  greatly  improves  his  account 
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the  prices  of  commodities." — Prof.  F.  H.  Giddings,  in  Political  Science 
Quarterly. 

Malthus  and  Ricardo. 


VOL.  IV.     No.  5.       Paper,  78  Cents. 

"  On  the  other  side  of  the  ocean,  where  the  same  dispute  between  the  de- 
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younger  investigators,  Prof.  Simon  N.  Patten,  who  has  learned  to  know  the 
empirical  methods  at  its  very  source  in  Germany,  breaks  a  lance  for  the  neces- 
sity of  deductive  reasoning,  claiming  for  it  equal  validity  with  the  inductive 
method." — Prof.  Bohm-Bawerk. 


PUBLISHED  BY  THE  UNIVERSITY  OF  PENNSYLVANIA. 
Political  Economy  and  Public  Law  Series. 

The  Consumption  of  Wealth. 

NO.   4.        Paper,   BO  Cents. 

"  Dr.  Patten  gives  here  a  magnificent  piece  of  work  on  the  theory  of  con- 
sumption. His  distinction  between  the  'natural  order,'  in  which  we  desire 
goods  for  consumption,  and  the  '  economic  order'  is  of  as  far-reaching  impor- 
tance as  it  is  ingenious." — Cenrad's   Yahrbiicher ,  1889. 

The  Principles  of  Rational 
Taxation. 

No.   6.       Paper,  SO  Cents. 

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our  industrial  condition,  some  new  point  of  view  through  which  a  solution  of 
the  perplexing  problem  of  taxation  may  be  solved." — Record  and  Guide, 
January  25,  1890. 


SIR  WALTER  SCOTT'S 

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LIFE  AND  WORKS  OF 

CHARLOTTE   BRONTE, 


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POETICAL  QUOTATIONS. 

Covering  the  entire  field  of  British  and  American  Poetry,  from 
Chaucer  to  Tennyson.  With  Copious  Indices.  Both  Authors 
and  Subjects  alphabetically  arranged. 

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PROSE  QUOTATIONS. 

From  Socrates  to  Macaulay.  With  Indexes.  Authors,  544; 
Subjects,  571;  Quotations,  8810. 

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GREAT  AUTHORS  OF  ALL  AGES. 

Being  Selections  from  the  Prose  Works  of  Eminent  Writers  from 
the  time  of  Pericles  to  the  Present  Day. 

"  The  diversity,  style,  and  classical  finish  of  most  of  the  matter,  next  to  the 
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reader,  and  creates  a  love  for  the  higher  realms  of  literature." — Pittsburgh 
Eve ?iing  Telegraph. 

A  CRITICAL  DICTIONARY  of  English 
Literature  and  British  and  American  Authors, 

Living  and  Deceased,  from  the  Earliest  Accounts  to  the  Latter 
Half  of  the  Nineteenth  Century,  containing  over  Forty-six 
Thousand  Articles  (Authors),  with  Forty  Indexes  of  Subjects. 
By  S.  Austin  Allibone,  LL  D.  Complete  in  Three  Vol- 
umes.    Imperial  8vo.     3140  pages. 

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FOREIGN    CLASSICS 

FOR  ENGLISH   READERS. 

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The  purpose  of  this  series  is  to  present  in  a  convenient  and  attractive  form 
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were  and  what  they  wrote. 

VOL  UMES  NO  W  READ  V. 

1.  Dante  7.  Montaigne  13.  Corneille  and  Racine 

2.  Voltaire  8.  Rabelais  14.  Madame  de  SevignC 

3.  Paschal  9.  Schiller  15.  La  Fontaine,  etc. 

4.  Petrarch  10    Calderon  16.  Tasso 

5.  Goethe  u.  Cervantes  17.  Rousseau 

6.  Moliere  12.  St.  Simon 

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ANCIENT    CLASSICS 

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A  Popular  Translation  of  the  Classics.  Edited  by  Rev. 
W.  Lucas  Collins.  i6mo  Fine  cloth.  Price,  per 
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1.  Homer's  Iliad         11.  Pliny  20.  Greek  Anthology 

2.  Homer's  Odyssey  12.  Euripides  21.  Livy 

3.  Herodotus  13.  Juvenal  22.  Ovid 

4.  Caesar  14.  Aristophanes  23.  Catullus,  Tibullus, 

5.  Virgil  15.  Hesiod  and  The-  and  Propertius 

6.  Horace  ognis  24.  Demosthenes 

7.  jEschylus  16.  Plautus  and  Terence  25.  Aristotle 

8.  Xenophon  17.  Tacitus  26.  Thucydides 

9.  Cicero  18.  Lucian  27.  Lucretius 
10.  Sophocles                 19.  Plato                               28.  Pindar 

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Brewer's  Dictionary  of  Miracles. 

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Ancient  and  Modern   Familiar  Quotations. 

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